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Tuesday, March 12
Updated: March 13, 7:21 PM ET
Selig sets June deadline for compliance

Associated Press

NEW YORK -- Baseball management is placing restrictions on the debt teams can take on, a move that could provoke an angry response from the players' union or even force trades of high-salaried stars.

Wed., March 13
There's nothing new about the 60-40 rule per se. It's all in how the commissioner's office is suddenly defining it.

Revenues are now not being calculated by value of the franchise, nor do they include projections of future income from TV deals or anything else. The "revenue" figure in this formula is simply defined as two times gross revenues.

Liabilities will also be a calculated in a new way. ... So a big-market team that's profitable or at least close to profitable -- say the Yankees or Rangers -- is suddenly calculated as having massive liabilities.

Click here for complete analysis of the 60/40 rule from Jayson Stark.

Commissioner Bud Selig, in a March 7 letter sent to teams, said they have until June to get in compliance with the rules, which say a team can't have debt higher than 40 percent of its asset value.

Selig's letter said teams could be fined, lose their payments from national broadcasting contracts or even be placed in trusteeship if they fail to comply with the rules.

The contents of the letter, sent with the sport in the midst of yet another contentious labor negotiation, were described Tuesday to The Associated Press and confirmed by several baseball officials speaking on the condition of anonymity.

According to the letter, teams will be valued at twice their 2001 revenue but they can ask for an outside evaluation.

Stadium debt and loans to owners will be treated as liabilities under the accounting formula, as will the present-day value of long-term player contracts, which would penalize teams that have signed many to their players to multiyear details.

"The reason it wasn't enforced for a while was the economic fallout from the 1995 strike," Selig said Tuesday night. "I wrote this rule in 1975. I'm the father of the rule. The clubs have known for a long time that I was going to enforce it."

Union officials did not return telephone calls seeking comment, and management labor lawyer Rob Manfred called letter routine correspondence with the teams.

Baseball announced restrictions on team debt in the early 1980s but hasn't enforced them in recent years. The union filed a grievance in 1983 claiming that the 60-40 rules, given the name because a team must have at least 60 percent of its value in assets and no more than 40 percent in debt, violated its labor contract.

Analyzing The Numbers
In the wake of Bud Selig's latest proposal to keep teams under a 40-percent debt/value ratio, which teams are in danger of breaking this ratio? Here is a guideline of potential "rulebreakers," using franchise valuations and debt from 2001 estimates made by Forbes magazine. Forbes' 2002 valuations will be released March 27 and the magazine has confirmed that 12 teams will break the 40 percent ratio this year, down from 14 a year ago.

Padres: $176M franchise valuation, 108% debt ratio
Twins: $99M, 84% debt ratio
Expos: $92M, 73% debt ratio
Brewers: $209M, 67% debt ratio
Devil Rays: $150M, 66% debt ratio
Tigers: $290M, 66% debt ratio
D-Backs: $245M, 63% debt ratio
Giants: $333M, 59% debt ratio
Rangers: $342M, 51% debt ratio
Mariners: $332M, 51% debt ratio
Astros: $318M, 50% debt ratio
Orioles: $335M, 45% debt ratio
Pirates: $211M, 43% debt ratio
Yankees: $635M , 40% debt ratio

Keep in mind that Forbes' franchise valuations would differ greatly from MLB's. For example, Selig says a team would be valued at twice its 2001 revenue; according to MLB figures released last December, the Yankees had 2001 revenue of $242.2 million, so they would be valued at $484 million.

Teams with the lowest debt ratio (again, using Forbes 2001 estimates):

Braves: 10%
Dodgers: 11%
Red Sox: 12%
Rockies: 12%
Mets: 13%

On Jan. 10, 1985, arbitrator Richard Bloch ruled in favor of the owners, saying there was no evidence at that time that the rules affected salaries.

Management lawyers told the union during Monday night's bargaining session in Palm Beach Gardens, Fla., that they are concerned a team could go bankrupt during a season because of low cash flow, several baseball officials familiar with the talks said Tuesday, speaking on the condition of anonymity.

The union, in turn, is concerned that restrictions on debt could lower the amount of money teams have to spend on player salaries.

Selig says the 30 major league teams are a combined $3.1 billion in debt but has refused to say what portion of that debt has funded team purchases, new ballparks and businesses not related to baseball.

In written testimony submitted to Congress on Jan. 22 and obtained by the AP, Selig said teams borrowed $1.4 billion from 1991 to 2001 to assist in financing new ballparks and renovations. Selig told Congress he did not know the outstanding balance on ballpark-related loans because of refinancings and interim payments.

Selig also said in his written testimony that from 1991 to 2001, owners borrowed $352 million against their teams to acquire the franchises. He could not give the outstanding balance for those loans, either.

In the past decade, Detroit has borrowed money from baseball's central credit line to make payroll. Several teams, most notably the World Series champion Arizona Diamondbacks, have deferred millions of dollars in player salaries to future years.

Selig's letter was drafted by Manfred and Bob Starkey, an accounting consultant formerly with the Minnesota Twins.

Owners told the union on Monday night that they did not consider debt restrictions to be a mandatory topic of bargaining under federal labor law.

In other news, Chicago Cubs president Andy MacPhail was picked by Selig to join the owners' negotiating committee, which already includes Manfred, new chief operating officer Bob DuPuy and outside lawyer Howard Ganz. Selig said he also will add another club official to the committee.

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