Team denies investigation about revenue sharing
The Major League Baseball Players Association said Friday that it has complained to Major League Baseball about the way the Pirates and Miami Marlins are using revenue-sharing money, but Pirates president Frank Coonelly said the league is not investigating the Pirates.
The collective bargaining agreement gives the union broad oversight of the league’s revenue-sharing program. The Pirates and Marlins have traded star players this offseason, though the Marlins sent
Pirates
away players with several years of control remaining while the Pirates moved players closer to free agency.
“We have raised our concerns regarding both Miami and Pittsburgh with the commissioner, as is the protocol under the collective bargaining agreement and its revenue-sharing provisions,” union spokesman Greg Bouris said. “We are waiting to have further dialogue and that will dictate our next steps.”
The Pirates cut about $19 million in payroll, including the salary offset of the players they received who are expected to make the active roster, by trading Andrew McCutchen and Gerrit Cole. The Marlins traded Giancarlo Stanton, Marcell Ozuna, Dee Gordon and Christian Yelich as a new ownership group, led by Bruce Sherman and Derek Jeter, attempts to remake the team’s finances.
“The Pirates are not being investigated by MLB and the commissioner has no concerns whatsoever with the manner in which the
Pirates are investing its revenue sharing receipts into building a winner,” Coonelly said in a statement. “The Pirates have and will continue to invest its revenue sharing receipts in an effort to put a winning team on the field.”
Instituted in 1996, revenue sharing attempts to narrow the gap between teams in large markets — which benefit from big television contracts, in some cases ownership shares of a regional sports network and higher ticket prices — and smallmarket teams with lower local revenue. Every team pays a percentage of their local revenue, and that money is redistributed.
Teams with a “market score,” a representation of population, income and cable households, of more than 100 (100 is considered average) are disqualified from revenue sharing. The Pirates market score is 56, 27th out of 30 MLB teams.
Article XXIV of the collective bargaining agreement requires a club to use revenue-sharing income to “improve its performance on the field.” That broad definition goes beyond the major league payroll and includes things such as the minor league system or draft, but revenue-sharing money can’t be used to pay down debt or as a distribution to ownership other than to offset tax obligations associated with club operations.
The commissioner can impose penalties if a team violates this rule. He also can require a two-year financial performance plan and, after consulting with the MLBPA, direct changes to that performance plan or put a portion of a team’s revenue-sharing money in escrow.
“We do not have concerns about the Pirates’ and Marlins’ compliance with the Basic Agreement provisions regarding the use of revenue sharing proceeds,” MLB said in a statement. “The Pirates have steadily increased their payroll over the years while at the same time decreasing their revenue sharing. The Marlins’ ownership purchased a team that incurred substantial financial losses the prior two seasons, and even with revenue sharing and significant expense reduction, the team is projected to lose money in 2018. The Union has not informed us that it intends to file a grievance against either team.”
In 2010, the Marlins, the union and the commissioner’s office avoided an MLBPA grievance by issuing a joint statement agreeing to spend on baseball operations and allowing the league and union to monitor the Marlins finances for three years. The union also had concerns at the time about the Pirates, who began the 2010 season with a $34.9 million payroll.
Former union executive director Michael Weiner said in later years that the Pirates spending and attempts to compete had satisfied the union. The Pirates payroll reached $99.9 million after the 2016 season.
Not including Jung Ho Kang’s $3 million salary, the Pirates 2018 opening-day 40man payroll is projected at roughly $78 million. They opened 2017 at $94.5 million.
“As required by the Basic Agreement, we share with MLB and the Union each year the detail as to how our revenue sharing receipts are used to put a winning team on the field,” Coonelly said. “What that detail shows is that while our revenue sharing receipts have decreased for seven consecutive seasons, our Major league payroll more than doubled over that same period.”
Though league revenue has increased each year, the Pirates have generated more local revenue and drawn closer to teams above them, meaning they receive smaller revenue-sharing checks.
“Our revenue sharing receipts are now just a fraction of what we spend on Major League payroll, let alone all of the other dollars that we spend on scouting, player development and other baseball investments, several areas in which we are among the League leaders in spending,” Coonelly said. “Thus, the commissioner is well equipped to address whatever ‘concerns’ the Union now purportedly has over the Pirates’ efforts to win.”
The union has the ability to file a grievance if it feels a team isn’t properly using the money and has the burden of proof in front of an arbitration panel … unless a club’s payroll is less than 125 percent of its revenue-sharing income, in which case the burden is on the club. The union also can ask MLB for an audit of a club, or conduct one itself “upon a showing of good cause.”
Revenue-sharing payments are not public. The Pirates received $30.3 million in revenue sharing in 2007 and $39 million in 2008, according to financial documents published by the website Deadspin, but the sport’s financial picture has changed since then, and that was two collective bargaining agreements ago.