The Extra 2% (35 page)

The mayor had good reason to change his tune. The alternative stadium sites that ABC suggested include several within the broader Carillon area, a big swath of land right near the bridge, though still on the St. Pete side of the bay. But the coalition’s two other top choices are both outside St. Pete: the Westshore neighborhood, just over the bridge on the Tampa side, and downtown Tampa. For St. Pete, the thought of losing the Rays to Tampa represents not only a scary thought in terms of loss of revenue (if ABC’s rosy estimates are to be believed) but a chance for Tampa to strike another major blow in a twin cities rivalry with a contentious history.

For a while, you could flip your radio dial to ESPN 1040 in Tampa during afternoon drive time and hear a sports talk show called
The Swarm
. Almost every day, host Marc Benarzyk would go on a rant about Joe Maddon. True to the show’s name, the attacks came swarming in against the Rays’ manager: too much lineup tinkering, too many bad bullpen choices, thinks he’s smarter than the rest of us. B. J. Upton is a lazy pariah who should be shipped out of town.
Carlos Peña is a bum who can’t hit. Typical sports talk fare. Get the haters on your side. Rile up your targets’ defenders. Just make sure you’re never, ever boring. But for Rays fans, the bashing in this case strikes a particularly sensitive nerve. The station took
The Swarm
off the air in the summer of 2010. But it still does not broadcast Rays games. ESPN 1040, headquartered in Tampa, Florida, broadcasts the New York Yankees.

The first sign you see crossing over the bridge to Tampa points drivers to George Steinbrenner Field, the spring training home of the Yankees. Much of the Yankees’ brain trust, including the heart of its scouting and player development departments, works there. When the Bombers play at the Trop, crowds often swell to near sellout levels, with chants of “Let’s go Yankees!” competing with the clanging of Rays fans’ cowbells.

“There are Yankees fans everywhere,” said Mark Newman, the team’s head of baseball operations. “But here, they are more ensconced than you might find in other places because of what the Boss and his family have done for the community. I’ve been here more than twenty years. We were here long before the Rays.”

While a fair number of Tampanians—transplanted New Yorkers or otherwise—side with the Yankees over the Rays, a far greater number see a rivalry between themselves and St. Petersburgers. It’s a rivalry about as one-sided as Yankees–Red Sox pre-2004. Tampa and St. Pete fought for the regional airport. Tampa won. The Bucs’ new stadium? Tampa won. The University of South Florida’s main campus? Busch Gardens? The zoo? Tampa, Tampa, Tampa. The Tampa Bay Lightning’s arena? Tampa won and inked a naming rights deal with the rival newspaper. That’s right. To see an NHL game, you must drive to the St. Pete Times Forum—located in the heart of downtown Tampa. For St. Pete residents, driving over the bridge to Tampa, whether for work or to catch one of the city’s many attractions, is routine. But unless they’re headed to the beaches, most Tampanians rarely cross over the bay.

Most of the area’s corporate headquarters are in Tampa; a lack of interest from the business community has tamped down season-ticket
sales and left many premium seats at the Trop vacant. Tampa is far more centrally located than south St. Petersburg, relative to the region’s major population centers. A proposed high-speed rail line from Orlando, originally routed all the way to St. Pete and the beaches, is (for now) slated to end in Tampa, with no possibility of crossing the bay until at least 2025. A new stadium in Tampa could pay far bigger dividends than one in St. Pete. But even if the Rays could Houdini themselves out of their lease, the political will and the capital simply don’t exist to build a new ballpark in Tampa. Not with the county knee-deep in debt for the Bucs stadium and revenue shortfalls whacking the public and private sectors for as far into the future as anyone can see.

Meanwhile, St. Pete has its own problems. The same economic woes hurting Tampa have taken their toll across the bridge too. The BP oil spill in 2010 created another potential setback for the Rays’ stadium chances. The Florida Gulf Coast was still sorting out the implications of the spill in October 2010, particularly with the area’s annual hurricane season under way. Term-limited elected officials already have a bias against looking too far into the future. Looking five or ten years into the future to see how a half-billion-dollar stadium project might work is a much lower priority than, say, fixing the damage that a gigantic oil spill, or even the perceived threat of an oil spill, could inflict on St. Pete’s beaches, tourism, fishing, and other industries. The spill may not be any more than a blip in the history of the Rays, but it is another setback they didn’t want.

St. Pete and Pinellas County have taken tangible steps toward preparing for stadium discussions. A 1% hotel tax kicks $5 million a year in tourism funds toward paying off Tropicana Field’s bonds. The 1% tax would have expired in September 2015, but the county agreed to extend the tax, creating a potential new funding source for any tourism uses it sees fit, including a new stadium. But that amount would be a drop in the bucket given the likely cost of a ballpark, sure to be considerably higher than the $450 million proposed
for the St. Pete waterfront site by the time a future construction crew would break ground.

If St. Petersburg does eventually come to the bargaining table—as the city has said it will—the financial documents leaked by Deadspin and the AP create potential leverage … for both sides, depending on your point of view.

St. Pete might reasonably argue that the Rays made $15 million in net income between the 2007 and 2008 seasons. That’s not counting the big boost that the 2008 World Series run provided for the Rays’ franchise value, plus the enhanced visibility of the team’s brand and the potential gains to be reaped as a result. Meanwhile, Sternberg and Silverman have focused on the negatives in the Rays’ finances. At a January 2008 luncheon, Silverman told a group of local businesspeople, “We’re cash-flow negative.” The next month, Sternberg told Rays blog DRaysBay, “We’ve certainly run significant cash deficits the past two seasons.” Those claims are contradicted by the leaked documents. Other accounting tricks could also obfuscate the Rays’ finances, said deMause. If a group of investors borrows money to buy a team, it could then assign that debt to the team and count it as a drag on the team’s books, even though it’s really just part of the investment cost.

On the other hand, the Rays could point out that a $15 million net profit over two years—one of those a pennant-winning year!—is a lousy return compared with other, thriftier teams, not to mention other investment vehicles. They could note that even their World Series run in 2008 did little to help the bottom line. The Rays banked $161 million in revenue in 2008, up 20% from ’07 levels. But expenses soared 31% year-over-year in 2008, to $146.7 million. By dramatically boosting player payroll and also hiking sales and marketing spending, the Rays were doing exactly what MLB would want a revenue-sharing recipient to do with its funds: investing in the team and trying to win a World Series. Yet net income actually dropped from 2007 levels, to $4 million from $11 million a year earlier. Even when the Rays climbed the mountaintop,
knocked off the Yankees and Red Sox, and surged to the World Series, they barely broke even. That’s a sign, they could argue, that new revenue streams—including a new stadium—are needed. Of course, the most likely way for those new revenues to outstrip the gigantic costs of building a new stadium and paying down its debt remains for taxpayers to pay for a huge chunk of the bill … which takes everyone back to square one.

Some of these shortfalls could resolve themselves organically. A better economy would certainly help. Time could also change the makeup of the Rays’ fan base.

More endemic problems remain. As long as the Rays play at Tropicana Field, they’ll be able to stretch their ticket prices only so far before running into resistance from already skeptical fans—whereas fans tend to be willing to pay higher prices at new ballparks. The 2009 team marketing report showed that the Yankees charge four times as much as the Rays for nonpremium tickets. For club seats and other premium tickets, the Yankees raked in more than eight times as much as Tampa Bay. Even if the Rays built a new, heavily subsidized stadium and charged much more for their tickets, their revenue streams would still be dwarfed by the Yankees’—especially considering the impact of the indomitable YES Network. The Rays could win five World Series in a row but still face a huge financial disadvantage against their rivals in New York and Boston.

If history is any judge, the Rays will eventually get that new ballpark somewhere in the Tampa Bay region. In the end, nearly every major league market has caved to such demands, doling out hundreds of millions of dollars for stadiums while trying to convince themselves that the investment will pay off. The exceptions are the Giants, who built AT&T Park mostly with private money; the A’s, still trying to find a new home in the other Bay Area; a few cities where ballparks were renovated rather than knocked down in favor of a new stadium; and Montreal, which lost its team to a city that was willing to build a new park.

“Only one team has moved in forty years,” said Rod Fort of the
University of Michigan. “The Rays’ not getting something out of the [Tampa] bay area is not a zero-probability event. But I would suggest the odds are dramatically in their favor.”

The big question is when, and will Sternberg be willing to wait that long? “I have been patient, if nothing else,” Sternberg said in a June 2010
Tampa Tribune
editorial meeting, one of the few times he’s spoken at length about a new stadium. “I’m not banging on a table saying I need a new stadium tomorrow.”

But?

“If I don’t get the sense there’s real cooperation, I’d sell the team.”

Is Sternberg posturing for the kind of gift the Marlins got from taxpayers? Or would the huge baseball fan with a Wall Street competitive edge really take his ball and go home? This is the uncomfortable question Rays fans face.

For all the positive arbitrage pulled off in trades, all the forward-thinking scouting, drafting, and player development techniques, and all the innovative branding and marketing efforts, Tropicana Field remains
the
major obstacle standing between the Rays and an ascendance to the rarefied air the Yankees breathe—that of a potential dynasty. They still wouldn’t be able to touch the Yankees’ monstrous total revenue streams. But as long as Sternberg, Silverman, and Friedman remain at the helm, the Rays have a chance to compete with anyone, even more so if they can raise the funds to keep winning teams together—or at least replace missing pieces with new talent.

The question is: which road will the Rays’ owner take? Sternberg could choose to slash expenses. Before the 2010 season even started, he vowed to drastically reduce payroll for 2011, whether the Rays won the World Series or finished last. Such thriftiness could all but guarantee healthy profits every year, the same way the Pittsburgh Pirates have funneled revenue-sharing funds into big profits. And like the Pirates, the Rays could lose big if the cuts are deep enough, despite the best efforts of front-office wizards.

The Rays’ owner could also follow through on his promise and
sell if he doesn’t get the stadium deal he wants, and soon. If that happens, the wheels could fall off in a hurry.

Baseball will always have a place for bold, innovative thinkers like Stuart Sternberg, Matt Silverman, and Andrew Friedman. A game so wedded to tradition runs the risk of perilously falling behind the times if it’s not infused with new ways of thinking. By mining for hidden sources of talent, Friedman and his compatriots put a better team on the field, and raised the quality of play for fans—the same way new ideas and new technologies keep the most successful companies ahead of the competition. But the free market allows the most talented minds in other industries to find the most attractive working environments, and Major League Baseball does the same. Silverman, Friedman, and the behind-the-scenes savants who helped build the Rays have succeeded despite astronomically long odds against them. At some point, though, the daily grind of trying to beat the Yankees and Red Sox with one hand tied behind their back might prove too much to bear.

The idea behind the extra 2%—finding ways to gain that little, but essential, edge on the competition—will always exist, in baseball as in business. It just won’t always belong to the Tampa Bay Rays.

The New York Yankees had been embarrassed. For the first time in fourteen years, they had failed to make the playoffs. The last time that had happened, Mike Gallego was their shortstop. (Derek Jeter had never before failed to play in the postseason.) Even more mortifying, the Yankees hadn’t just finished behind their well-heeled Boston rivals. When the curtain fell on the 2008 season, the Tampa Bay Rays—the American League’s perennial doormats and a team with a payroll five times smaller than New York’s—had won the American League East title, and the AL pennant.