Effectively Wild: A FanGraphs Baseball Podcast - Effectively Wild Episode 873: The Braves Are the Best (at Bilking Taxpayers)

Episode Date: April 29, 2016

Ben and Sam talk to Bloomberg’s Kate Smith about how the Braves have talked taxpayers and local councils into funding ballparks at every level of their organization.

Oh, there's a rain and I'm feeling okay. Sun back again, it's a beautiful day. Oil in the water, hair's a pattern of my eye. Sun in the windows, got me feeling just fine. Good morning and welcome to episode 873 of Effectively Wild, the daily podcast from Baseball Perspectus, presented by our Patreon supporters and the Play Index at BaseballReference.com. I am Ben Lindberg of FiveThirtyEight, joined by Sam Miller of Baseball Perspectus. Hello, Sam. Howdy. the Braves have been at baseball. And if the Braves are good at one thing, and literally they might only be good at one thing, it is convincing taxpayers and local council people to put the bill for their ballparks. We know a bit about how this has worked at the big league level, but an article earlier this week in Bloomberg Businessweek described how they have really implemented this

methodical scheme top to bottom in their organization. The article was by Kate Smith, Hey, Kate. Hey. aware of all the Cobb County shenanigans with the Braves' new ballpark, but I didn't know that the roots extended so deep. So what was the impetus for the story and how did you go about reporting this? Sure. So this actually came, this is a four-month project. We were looking at this for quite a long time and it started in December. I was writing, it was simple as I was writing up a report of some recent upgrades and downgrades of town. And I noticed that there was this town called Pearl, Mississippi, and they had received this large downgrade. And I looked in the report and it was because of a stadium. And, you know, as a Mooney Bond reporter, stadium, you know,

we love writing about these. So I looked into it and it turned out it was a minor league stadium. And so I wrote up a small thing about it and put it to my editor. And my editor kind of comes back and is like, why don't you look a little bit more into it? Who owns them? And I found out that they were owned by the Braves. And that's a really unusual business model for the major league team to actually own their minor league team. And it kind of went from there to try to figure out how unusual this is and how far it went. So if you can summarize how the Braves go about this, what is the process that they have followed in getting these little towns to pay for their ballparks? Well, you have quite a few commonalities, if you will, between all these states. And I should mention that it's, you know, all the way down from their single A in Rome to, of course, the Gwinnett deal, triple A, then Pearl right there in the middle at double A.

And it seems that they're kind of methodical about putting together these very complex packages where there's tons of different revenue streams and from a million different places. And then they bring in these, you know, big wigs from Atlanta, which I should also mention, if you're independently owned, like every other minor league team, that's like not something, that's not a bargaining chip that you would have. You can't, you know, do handshakes with Hank Aaron to try to convince some local mayor to build a stadium.

So this is something that's very unusual for the Braves, that they have that kind of inherent celebrity, if you will. And they always tell you that they're going to bring in so much money. And not only will the stadium, you know, pay itself off, but also it's going to pad the tax revenue for the town. And of course, as we talk about in the story, that has literally never happened. So it's kind of their process. Do you get the feeling that to the politicians that approve these or the city managers that approve these, it matters whether the promises are true, whether over the course of decades it actually pays off? Or are these still politically very popular in the towns that they're in? You know, it's really tough to say because I was down in Mississippi for a little over a week, you know, working this story.

And, you know, you would think that the stadium would be full and it's not. I went on opening night for Pearl, the Mississippi Braves, and it was maybe half full at like the most crowded point in the game. So they don't appear to be tremendously popular. And I also went to a Rome game similar. They don't seem to be tremendously popular in general. But the thing is that, you know, when I was speaking to the mayor, he's very proud of this. Like this is one of the, you know, the proudest things that he's ever done. And the nature of, you know, local politics is such that, you know, by the time this thing isn't working anymore, he's not in office. A lot of the,

you know, other city council people aren't in office. So it's easy for them to say, like, well, when we were in office, this is all working well. And then it's easy for the current administration to be like, well, I had nothing to do with bringing this there. So it seems like everyone's really eager to jump on board when things aren't going wrong yet and say that they were a part of it. But it's also really easy just by like the nature

of government to kind of not ever take on any blame either. Yeah. And so who is the orchestrator of this scheme? If there is one person, of course, the Braves are owned by Liberty Media and the chairman of Liberty Media is John C. Malone, who is worth about $12 billion, which is a lot of ballparks. And, you know, he has a reputation for maybe being, I don't know if I would say unscrupulous, but certainly cutthroat in the business world. Is he the brains behind this scheme? Or is it hard to pinpoint one person? It's, of course, hard to pinpoint. And I love the, I think Al Gore called John Malone, Darth Vader at one point. So that gives you like an impression of what people think about John Malone

and his kind of cable practices. And it's really tough to say. And of course, you know, the Braves are a very sophisticated organization. Like if it was so easy to pinpoint one person, they wouldn't have done that. But so two people, it seems kind of like it's Mike Plant, who's their business development head. And he seems to be the commonality between this Pearl deal and then also the Gwinnett deal and then, of course, the Cobb deal. One interesting person that we also found in our reporting, Ira and I, was a guy named Tim Bennett, and we mentioned him in the story.

And he seems to be this minor league stadium fixer. league stadium fixer. And so he grew up in Florida and wanted to, from what we can tell, it sounds like he just wanted to build minor league ballparks and he would. And so he kind of gets this break to connect a town with a ball, I'm sorry, to connect a team with a town. And then he collects a pretty good bonus off of that. So he seems to also be, he was only involved in one of the deals, but he was an interesting character in kind of making

this all happen. Yeah. And would it be going too far to call this a kind of Machiavellian operation? I mean, they're playing towns and counsel people against each other and making them compete essentially to pay for the Braves ballparks? I don't think that would be a stretch at all to say. I mean, that's clearly part of their, you know, MO is that. I mean, one thing when we were, like, first talking about this story is because, like, look, there's, like, a thousand stories about stadium financing, right? Like, that's not newsworthy that pro sports take advantage of towns.

Like, that's a pretty well-recorded story. But what we found interesting about this one was that it was the minor league so like when a team wants to move there's only so many major metro cities in the u.s that can handle a pro sports team so in the case of like it's like the yankees wanted to i don't know build like a massive stadium here in new york you know and have taxpayers pay for it, of course. They're not going to have very much luck being like, well, you know what, if you don't build this for us, we're going to go move to, well, where are you going to move? Probably every city already has one.

So the minor league has this really interesting disadvantage is that, you know, you don't have to be in New York City to have a minor league team. You can be 20,000 person Pearl, Mississippi. So it's easy for the Braves to have that as part of their negotiationship where when they want to move, they can easily go to the town there and be like, well, this is what we want. And if you're not going to build it for us, we have a handful of other cities that are more than willing to do that and probably do even more. So that's definitely part of it. And we spoke to the person who was in charge of negotiations at the place where the Mississippi Braves used to play.

And they didn't mince words at all. The Braves apparently were very clear with them. Like, if you don't want to do this, there's a million other places that will. Like, we don't need to be here. So they, you know, it's not kind of that homey feeling. They want to stick with the team. Like, they just want to get as much money as they can for their new stadium.

Do you get a feeling that they run into any cities that won't? Is it pretty much universal that every city is willing to do something that is against their interests in order to get this little bit of prestige and ribbon cutting? Do they have to shop around much? That is one thing that I was really interested in. And that's a little bit hard to find, of course. But we did find two examples. And one was actually with the Braves organization. And I'm blanking on the name, but it was for the Gwinnett deal.

And basically, I think it was Greenville, South Carolina. And they said no. Like, we're not, like, absolutely not. Because, I mean, if you remember, the Gwinnett deal was like $65 million, which is just so much money for a town. And they said no. They weren't interested. And it actually worked out very well for them because then the Red Sox came

and they built this, like like mini Fenway Stadium. It was cheaper and it's done a lot better, obviously, than Gwinnett has. And then, of course, you know, when the Mississippi Braves moved to Pearl, that was because the town said no or not where this is where this ends. And then in Providence, they want to, well, there were some people who wanted to move the stadium from where it currently is in Pawtucket to Providence, and that ran into some issues as well. So you do have little pockets, but the issue is that there are 120 minor league teams. So for every one town that says no, there's a handful of towns that say yes. So the Braves big league ballpark is projected to cost something like $722 million.

Of course, all these ballparks eventually end up costing more than they're supposed to cost. But you can understand why a team would want to get out from under that kind of charge. What does a lower level minor league ballpark typically cost? And what kind of economic burden are these towns going to be laboring under? Sure. Well, it all depends, of course, what, you know, which, where in the farm league system you are. Like if you're a single A, it's probably between 15 and $20 million. You'd have a hard time getting away with more. Double A, which is the Mississippi town that we highlight in our piece, that was about, I want to make sure I'm doing my math

right, so if you'll just bear with me for a second. That one was, that was almost $30 million. And that was on the expensive side for a double A. And then their triple A was $65 million. And the thing is, like, they kind of are commensurate with the town. So a triple A team is going to be in a larger town that can withstand, like withstand that level of development in that size stadium. And when things go wrong, they can go very wrong because, like I mentioned, this isn't New York City. This is Pearl, Mississippi, who has a very small annual budget. It doesn't exceed $25 million. So in Pearl's case, they've been paying 5% of their annual budget towards stadium debt, which I have to mention, they thought was going to make money for them. So, not only is it costing them money, it's like virtually the opposite of I know that, like, you know, that can seem maybe, like, too financy. But what downgrades mean is that you can't ever borrow money if you get to

a certain level, right? It means that you can't issue bonds when you want to build a new road, or even repave a new road, or if you want to build a police station or a water system. Like, these are really, like, basic needs, what the stadium, you know, intersects with here. And as it is there, this is money coming out of their general fund. You know, it's not just about their rating, but it's coming out of their general fund. And not all of us necessarily know what municipal governments are responsible for. But for a city like Pearl, where does that come from? I mean, I assume it means that you get worse service at the front desk of City Hall.

But what does the local city government generally pay for out of the general fund? Sure. That would be things like services, like you mentioned. It would also be public safety, so police and fire. You know, if you look at distressed cities across the country, you know, think Detroit, Chicago, a lot of times you'll see layoffs with personnel workers, so police and fire. And one thing that famously happened in Detroit was the call time for like if you know if you had a heart attack in Detroit, how long would it take an ambulance to get to you? Or if you reported a break in, how long would that take?

And that's directly correlated with how much money you have there in your general fund. It's also things like I mentioned, like streets, roads, lights, and parks, you know? So basically, like anything that makes this city or town nice to live in, that's what the general fund is for. Is this a voter-approved bond? The stadium deal? Yeah, in Pearl? It was not.

It was approved. So that is one of the things. One thing I really like about this story is that when you look at it chronologically, it's as if the Braves learned along the way. You know, they were kind of figuring out what works and doesn't work. And one thing it seemed like they figured out back in 2002 in Rome was that don't put these things up for election. They barely, barely won that. And so in Pearl, instead of making it the kind of debt that needs to be voted on, they made it the kind of debt that only the

city council members need to vote on. So it's a lot easier to convince five people to vote on a stadium than it is an entire town. So for Pearl, no, it did not go up to a voter approval. And you mentioned how well covered this subject has been at higher levels. So do these guys Google? I mean, like, do they, are they aware of the research and don't care? Are they aware of the research and think it will be different in their case? Or are they aware of the research and just indifferent to it? I think it's like a little bit of all of those, right? It appears they all know it, you know, when you when you give them those facts that are always like, oh, I know. But every single one thinks that they're going to be the exception for unknown reasons, I should say. They always think they're going to be the exception. They always think that

they're going to be like there's like this intangible to it. And like and that is very real. Like having a minor league like, and that is very real. Like having a minor league team in your town is really fun. Like I personally am a baseball fan. It would be really cool to have that. Like I totally get it, but the issue is that it just doesn't pay for itself and every town thinks that there'll be the one that it does work for.

And then you have at the top, I mean, we spoke to Mike Plant over at the Braves. I mean, and his direct quote, and you have it in the story, is the quote unquote so-called sports economists are just wrong. So like when you have someone like that, like someone who's so far up and like so entrenched and telling you that if you're a mayor, it's hard not to believe that, you know? Right. And so as you were reporting this, did you encounter people in different stages of remorse slash reluctance to talk about it? Or was everyone like, yeah, we did it and we'd do it again? So specifically in Pearl, and that's where I spent the most time, and that's where we spend the most time in the story as well. I was there for maybe four or five

days, and I was really easy to speak to the administration that had put it together. The former mayor, Jimmy Foster, is very proud of it. And when he was in office, from financial documents that we sorted through, it doesn't look like anything went wrong. So it's easy for him to be proud of it. But for the current mayor, Brad Rogers, he was very difficult to talk to. We had an initial phone meeting in January, very, like, very unhappy, like, it's none of your business, very angry. And then when I, when kind of as this story grew and we were going to go down to Pearl, I started calling him, like, I would like to set up a meeting, nothing, nothing, nothing, like two months. And then we actually, I actually, like, staked him out. I sat in the parking lot of City Hall for three hours waiting for him because I went in and the secretary was like,

oh, he's not here, don't bother waiting, he's not coming back. So I was like, okay, well, that doesn't really seem that plausible. So I just waited until he got back and then I just popped in the office. I don't think he was very happy, but he kind of didn't really have a choice at that point, I guess. Right. And are you aware of any analogs to this? Are there other teams doing this or does the Braves owning every station along their minor league chain make this sort of a unique situation? I think the latter of what you just said. The Braves organization makes this different because,

and one person pointed this out to me on Twitter today, and it was just like it encapsulated everything I was trying to say. It's like the Braves have done stadium deals before. They do stadium deals all the time. But when they go to a negotiating table with a town, that's probably the town's first time that they've ever negotiated a stadium. And when you have the whole organization, like all the minor league stadium, like all the minor league and the major league all in one organization, you're negotiating for stadiums that much more often. And you really, you have that pull. I mean, we were talking to

these town officials and like, it sounds really nice. They got to go watch opening day at the owner's box down in Atlanta. They got to do all these great things. They got to meet people who, I mean, if you're a Braves fan, you idolize. So they really have a unique position of negotiation. Whereas if you're a minor league team of any other organization, you know, the coach, like, you know, Bobby Cox of, you know, whatever, isn't going to be in there in the negotiation room, like, you know, swaying something. So it's the fact that the Braves own all their minor league makes this like a very unique situation, I would say. So here's a depressing way to read this article. All of the future Pearls aren't going to learn

this lesson because it's going to be new city council members making the same mistakes but the other 29 major league teams might learn something from this and start owning their minor league clubs oh no using their using that financial strength to um you know basically make these huge profits are the brave still unique is there any is there any movement at all toward other teams buying their minor league teams that you're aware of? Not that I'm aware of, and I would be so depressed if that was what actually comes with my story. That would be so sad. It doesn't appear so, but I mean, it's hard to— I would be surprised if they didn't because, look, from a financial standpoint,

baseball teams are not particularly profitable. We were listening in on this analyst call with Liberty Media, and a lot of the investors were on the line asking, what's the deal with the Braves? What's going on here? And you had someone at Liberty Media be like, look, owning a baseball team is not a cash-rich business. This is not... And from his tone, from everything, it seemed like he was surprised that having a baseball team wasn't the, you know, the business that they thought it was going to be. And then you have Malone at the top, you know, who who's known for this stuff. He's known for trying to get out of as many taxes as he can. He views that as like his personal promise that he gives to shareholders. Right.

And then you just you take a look at the Braves balance sheet. You're they're able to offload half a billion dollars of capital expenses. So why wouldn't you? Yeah, and I mean, it seems really sleazy and underhanded in many ways, but there are probably other areas of baseball in which some of the same sort of tactics have sort of been celebrated by baseball writers as kind of cleverness, you know,

finding inefficiencies, right? The Braves are not doing anything illegal here. They're taking advantage of a system. It's not so different from what teams collectively do to amateur players in the draft or what teams do when they sign young players to long-term extensions because they can afford to give those players the financial security that they wouldn't have otherwise. So it's not totally different, but it feels worse for some reason. It does feel worse. And I think it's because, to me anyway, why I think it feels worse is because you have taxpayer dollars, right? So you have someone in Pearl who didn't ask to be involved in baseball. They didn't ask for the Mississippi Braves to come to their town,

but yet they're going to suffer because of it. And they had, you know, they didn't ever want to be involved. And then one thing that you mentioned, and I don't think this actually made the story, was that the Cobb County deal was actually, someone sued it. So these things are getting a little questionably legal because the use of those bonds, and not to get wonky on you, but, like, they are only supposed to get wonky on you, but like they are

only supposed to be used for public use, like public use services. So a police station, you know, something that everyone in the town, if you're a taxpayer, you would benefit from this directly. And so their argument was that a major league baseball stadium does not, that's not a public facility. Like if you're building it for a corporation, like however you want to cut the braids, they're a corporation. Like, why are we doing this? So I think people are starting to really fight back on these and really question like whether or not that actually is legal. I mean, of course, the way the Braves do it and are in a particularly sleazy way, but everyone does this. And I think everyone is starting to really question, you know, is it actually legal? Can they actually do this? Like, I think it's been a question.

Well, it's probably good that they completed this process when they did, because I don't know that rolling out the red carpet at Turner Field this year would work so well. I don't know if it's that great a spectator experience. You have a quote from a Floyd County manager who says it was hands down the highlight of my life to go to a Braves game. And given the way that the Braves have played this year, it seems like it would be hard to hit that bar now. Yeah, probably. But they are finished now. They have completed their publicly funded ballpark bingo card and done this at every level they could. Yeah. I think the oldest one is there's Single A in Rome, Georgia. That opened in 2003. And typically, these things are 20-year leases.

So, effectively, in 2023 is the next time we might see them starting to do this. All right. Well, I hope people will have wised up by then, but that seems unlikely. By the way, the Liberty Media Group offered public stock earlier this year. I think it opened at 35 or so, and it's now at 18. Should we be buying? Because this seems like pretty good business practice if you are a stock owner. It would be. So it's a tracking stock. And I think the best way to understand a tracking stock is that you're not supposed to understand a tracking stock. There are these very obscure, weird things that pretty much no one uses anymore, actually, except for John Malone, because he's this financial engineer genius. And so I was speaking to a couple of our analysts over here at Bloomberg named Oliver Renick, and he was telling me that typically when a tracking stock open, it's hard to say what the price should be. So that huge drop actually

wasn't the like the major drop that it looked like, but it did drop a little bit, just not that like crazy happening that you saw. Okay. Yeah. Well, I will link to this story and all the places that we usually link to stories. It is a really great story about an appalling story. So thank you for writing it, Kate. You can find Kate on Twitter at Kate Smith Muni. Thanks, Kate. Yeah, thank you. All right.

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