Salaries and bonuses taken by Major League Baseball club owners did not materially affect MLB's projected $519 million net loss this year, said a financial consultant to the league.
"If an owner is drawing a salary for operating the team, it is an expense like any other expense," said Bob Starkey, whose Minneapolis-based Starkey Sports Consulting is a financial adviser to MLB. "The suggestion that this $519 million of losses are materially impacted by the salaries the owners are taking is preposterous."
Starkey made his assertion about the owners' salaries and bonuses, which are included but not detailed in the $1.6 billion in expenses baseball claimed under "national and other local operating expenses," even though he has not seen those numbers for 2001. "I have seen them in prior years," he said.
During a press conference earlier this month, MLB Players Association chief executive Donald Fehr presented a scenario in which he said owners' salaries could affect clubs' financial losses.
"Let's say I have a company, the XYZ company, and at the end of the year the XYZ company has a profit of $10, but I decide to pay myself, the CEO, a bonus of $20 because I have that much cash lying around," Fehr said. "I will now show you an audited financial statement that shows a $10 loss."
Fehr also said that amortization of items in financial statements is a smart move to lower the amount of income a business has for tax purposes. But, he added, "It is not the same as a cash loss."
Starkey said that the $1.6 billion in national and other local operating expenses includes amortization of stadium costs for some MLB clubs. Those particular amortization costs are not broken out in the publicly available information.
Additionally, a $174 million item in the statement called "total other expense," which makes up about a third of the $519 million loss, is "primarily the 2001 amortization of franchise acquisition costs from prior years," Starkey said.
