Yeah, Ricketts Family Debt Service Payments Are Probably Coming Out of Cubs Revenue

tom ricketts firing hendryIn light of yesterday’s extensive financial discussion, which emanated from uncomfortable comments made by President of Baseball Operations Theo Epstein about the baseball ops budget (and payroll being maxed out), I’ve spent the better part of the last 24 hours thinking about the Cubs’ financial situation. I’ve changed my thinking on one particular issue, and that change is going to guide some of my over-arching thoughts going forward. So I’d like to spell it all out for you.

Now, before we dig into that, there are some necessary preambles, because this is some seriously nuanced stuff. Among those preambles, I always feel the need to caveat: I know very little about the actual financial documents involved. There is always a chance that every conclusion I draw, however well intentioned, could be dead wrong upon a review of the private financial data. I’m here only to do the best I can with the information I have available to me.

You’ll recall that the genesis of this new wave of financial discussions was an investigative piece by Gordon Wittenmyer, published on Opening Day, in which he reported – among other things – that the Cubs’ payroll has been dropping like a rock under the Ricketts Family’s ownership because of the debt burden the family took on to purchase the Cubs and the associated debt instruments, which include all kinds of restrictive elements. Prior to Wittenmyer’s report, there was a casual and widespread belief that, although the Ricketts Family had taken on substantial debt to purchase the Cubs, that was merely a condition of the sale, which allowed the Tribune Company and Sam Zell to avoid substantial capital gains tax associated with the sale. Thus, there was no reason to be concerned about the debt or the related obligations interfering with the finances of the Cubs, because the Ricketts Family had plenty of money to pay cash for the team if they’d been able to. Wittenmyer’s report gave that belief some pause, but I remained skeptical, as I wrote at the time.

Separately, but relatedly, Theo Epstein’s comments this week about the baseball budget – comments which were arguably incompatible with things we’d heard previously from the front office – raised some concerns about the amount of Cubs revenues being made available to the baseball side, versus the amount being used, for example, to service the Ricketts Family’s debt. In that way, these issues are related: more debt = higher service payments = less money available for baseball operations.

So, harmonizing everything, there are two subtly separate but related financial questions out there: (1) Is the Ricketts Family crushed by a huge amount of debt they took on to purchase the Cubs, and that debt is governed by complicated instruments that prohibit the Cubs from spending freely for a considerable length of time? (2) Is the Ricketts Family using Cubs revenues to service their debt, thus reducing the money available to the Cubs organization?

In a recent Dave Kaplan piece, he actually touches on each question. To the first, he quotes an anonymous former purchase candidate about the purchase process:

Minimizing tax liability with debt financing was the No. 1 goal of Tribune Company management and Sam Zell in selling this asset. That alone made it a tough deal for many of the interested parties to handle. Add in the fact that the world markets were on fire so financing was very difficult to obtain at that time. Whoever was going to buy the Cubs — from Mark Cuban, to John Canning, to any of the other interested parties — was going to have to play under those rules. That narrowed the playing field quickly. Plus, do you really think that [MLB commissioner] Bud Selig, who is one of the smartest guys around, would have allowed the Cubs, a premier franchise, to be operating under a risky structure? No way.

That’s that, and largely dispenses with the first question. Whatever the crazy structure of the purchase, it wasn’t because the Ricketts Family couldn’t afford the purchase without so much debt. (More on that in Kaplan’s article.) And, whatever the crazy structure of the purchase, MLB is on board with it – and MLB has no interest in seeing the Cubs’ ability to be competitive crushed under the weight of a bad deal. So I have no worries about that.

As to the second question – whether debt service payments are coming out of Cubs revenue – Kaplan seems to offer an answer: “It also appears that the large debt service payments that the Cubs are responsible for have maxed out the money available for the rebuilding process that Epstein and Hoyer are in.” In other words, whether you characterize the debt as the Ricketts’ or the Cubs’, the financial burden of that debt is falling on the Cubs. That’s a real bummer.

It has been reported, and is generally accepted, that the loans to the Ricketts Family to purchase the Cubs came from a variety of sources, including banks, private investors, and a Ricketts Family Trust. We don’t know the amount of loans from each source, and, although I’m going to focus on the Family Trust, these points are generally applicable to any debt the Ricketts Family took on in order to purchase the Cubs. The Ricketts Family – not the Cubs – benefited from that debt because they (the Ricketts) now own the asset (the Cubs).

If it is true that the Ricketts Family Trust loaned the Ricketts Family some money to purchase the Cubs, and if that loan came with an interest rate attached, then I have some concerns. If the Ricketts are using Cubs revenues to service that particular debt (i.e., to make the required interest payments), they are merely taking Cubs revenues and making “interest payments” to themselves with it. Yes, technically, in this setup only “the Ricketts Family Trust” is receiving the Cubs revenues, but is that really a distinction worth making? The Ricketts Family, in this setup, is transferring Cubs revenues into their own pockets under the guise of “debt service.”

Now I want to be crystal clear about something: I do not have a problem with the Ricketts Family making money off of the Cubs. I am not saying that any of this setup – if I even understand it correctly, and there’s a pretty fair chance that I don’t (these things are complicated) – is wrong. It sounds creative, and I award two points for creativity.

The issue I have, and it’s the only issue I’ve ever had with this financial stuff, is the repeated statements that every dollar the Cubs bring in the door is being put back into the Cubs organization. If I understand the debt service payments correctly, I don’t think it’s fair for the Ricketts Family to, on the one hand, pocket these service payments from the Cubs, and, on the other hand, generate goodwill by saying things like, “Every dollar the Cubs make is put back into the organization.” Because whether or not that statement is technically true, based on a complicated series of transactions and entities, it is not genuine.

Again: I don’t blame/hate/curse/whatever the Ricketts Family for making some money off of their business. God bless, and Go America. I have to emphasize this as boldly as possible (twice), because this is a point on which I receive a lot of flak. Me not say Ricketts bad.

I just would like a little more transparency about this issue. Is every single dollar of Cubs revenue – after taxes – going back into the Cubs organization? Or is every single dollar of Cubs revenue – after taxes, Ricketts Family debt service, and whatever else – going back into the Cubs organization? Those are two very different things, and I just want to know what I’m looking at.*

I probably don’t have that right, and we might never know. But I’ve always thought of professional sports teams as a kind of public trust. Yes, you can make money off of the teams, but you also have to realize that you are doing so on the backs of a base of fanatics who desperately want to believe their teams are always moving in the right direction. It’s easier to believe that if we have faith in the ownership. And it’s easier to have faith in the ownership if we feel connected to them through transparency, openness, and shared passion.

In the end, I’m not mad at the Ricketts, and I don’t think they’ve really done anything wrong. But I’m disappointed that it’s taken this long to get to a place where I finally think I understand what it means to “put every dollar back in the organization.” It’s not what I thought it meant, but maybe that was my fault.

Pending a correction or clarification from the Ricketts Family, the weight of authority on this issue (including Epstein’s comments this week) leads me to the conclusion that, until the Ricketts Family debt is completely paid off, the amount of money available to the Cubs’ organization is going to be reduced by the amount of the debt service payments each year. Depending on your source, the debt service payments range from as low as $20 million to as much as $40 million annually. That’s a healthy chunk of change that the Cubs could otherwise be spending on, for example, a banner free agent.

Like I said. It’s a bummer. Then again, if this issue goes away as soon as the Cubs emerge from their rebuild – whether because revenues increase or because the Ricketts Family starts paying the debt service on their own – it’s not really a huge bummer. After all, not having that $20 to $40 million available right now is only an issue if there were free agents that Theo Epstein and Jed Hoyer wanted whom they could not sign. Maybe there weren’t any. And maybe when there are, the debt service issue will vanish. Here’s hoping.

*Subject to the caveat that MLB owners are prohibited by the league from making certain financial disclosures public. I’m certainly not asking for the Ricketts to turn over their books, nor do I think they should have to.

Brett Taylor is the editor and lead writer at Bleacher Nation, and can also be found as Bleacher Nation on Twitter and on Facebook.

312 responses to “Yeah, Ricketts Family Debt Service Payments Are Probably Coming Out of Cubs Revenue”

  1. Coal

    I believe that when the Cubs get ‘close’ (i.e., have a much better young nucleus) and are a piece or two away, they will spend freely if there is a piece to be had. The lure of a championship will be too great not to.

    However, this does suggest that they are (more) comfortable wating a few extra years than the average fan.

    An argument could be made that by doing so, they are putting more pressure on the young nucleus to develop more quickly that might otherwise be the case, which could backfire.

    I do believe that Ricketts purchased a much bigger mess than he anticipated, and that we should be reasonable in our criticism to give him some amount of time to sort through the significant number of issues facing the organization on all fronts.

    For me, through 2013 is ok, possibly through 2014. But sucking in 2015 (which would be several years in a row) has the potential to really do some damage to season ticket holders loyalty and casual fan interest.

  2. Kramden

    The bottom line for Cub fans….

    The Cubs have become the new Tampa Bay Rays.

  3. Blublud

    I have defended Rickett on this from the start. However, this seem slimey at best. If they basicly loan themselves money, they can also decide where to set the interest rate and I’m sure they would all agree on a very high interest rate. Then use revenue from the team to pay off those “high interest loans”. They pay no taxes on those payments because it’s part of the daily operations of the Cubs, and I think I’m positive there no taxes on the other end because it’s going back into a trust. All this while lying to the fans about it all revenue going back into the cubs.

    If they loaned themselves money at anything other then a 0% interest rate and are paying anything back to themselves other then what they paid to purchase the team, then it’s very sleazy. I don’t have a problem with them making money, as I have stated before, but don’t sleazy and lie about. Makes me wonder what else they may be lying about.

    1. Timmy

      yes. we need new owners already.

    2. ChrisW

      MLB would likely have required the interest rate to be similar if not the same as other lending sources.

      I doubt that MLB would have approved a purchase where the Ricketts Family Trust was pillaging the Cubs’ revenues, for their own financial gain. However, charging yourself the going interest rate for a loan, that you had to take, is just smart business.

      1. Die hard

        Oy Vey! Your naïveté is heart warming but this is the real world of big business and Bud wasn’t going to take the first shot at the golden goose at Clark and Addison

        1. ChrisW

          Do you really believe that the interest rate being paid to the Ricketts Family Trust is significantly higher than the other rates on the Cubs’ debt?

          Not naive, just don’t think that the other owners would approve this deal if they were essentially stealing money. Details from deals like this always leak out and the publicity would be a shit storm for MLB and the Ricketts.

      2. Eternal Pessimist

        I don’t think it matters to the rest of the league if the cubs under-perform by spending like a mid-market team. That just makes some other team relatively better. Every game will always have one winner and one loser (too often it has been the cubs). I think the league is more interested in preventing a situation where the NLB needs to come with a bail-out of a failing team. It seems embarrassing that we fans need to look at this team as mid-market to high mid-market in the future because somehow the smaller markets are set-up better to succeed relative to their revenues (still don’t see how this is possible).

      3. aaronb

        I’ve said it before and I will say it again. This looks almost exactly like the Frank McCourt purchase and ownership of the Dodgers. And Bud Selig sure didn’t do anything initially to stop that.

        Also, keep in mind that the only Ricketts with money is Dad. A noted non fan of baseball. So what is really going on here is that Dad loaned the kids 175 million to buy the team. His loan and the rest of the debt has to be paid for by Cubs revenue. Simply because there is no Ricketts money to pay for any of this. The bank of Papa Ricketts is closed.

    3. Die hard

      Why are you surprised? Start with the dad and the other apples don’t fall far from the tree

    4. Internet Random

      If the trust is receiving interest income, it will pay tax on it.

      And the minimum-interest rules prevent no- and excessively-low interest loans.

      As Brett has made clear, the only thing that might be unsavory here is that there have been some noises made that seemed intended to give fans the impression that as much revenue as possible was/is being invested in the improvement of the team.

  4. The Dude Abides

    “I know very little about the actual financial documents involved. There is always a chance that every conclusion I draw, however well intentioned, could be dead wrong upon a review of the private financial data. I’m here only to do the best I can with the information I have available to me.”

    I assume there are some misses here in your analysis but the premise is probably close. How anyone who has been watching since Rickett$ family took over could be surprised is amazing. Again, Theo is the barometer he stays we are going to be ok he leaves UH-OH!!!

  5. SirCub

    Not so short, but very informative! You’re like one of those real journalists dedicated to bringing the truth to the public.

    1. SirCub

      Hmm, I immediately regret my phrasing of “real journalists.” I hope you don’t take offense! I think you’ve got a lot more journalistic integrity than a lot of those other so-called journalists. Keep up the great work!

      1. MichiganGoat

        Whatevas “Real Knight”

  6. Spriggs

    My problem with the criticisms of this debt servicing issue is:

    Ricketts was forced into the general debt service arrangement to satisify the mandatory requirements of the sale, by Zell or the Tribune, or whomever.

    If Ricketts financed a portion of that with a loan from their family trust, we don’t know what the interest rate on that loan was. It could very well have been the lowest rate they could get away with, or at least lower than the banks would charge. So, although those interest payments go back to their family, there is less of a payment in the first place (than there would be if it were going to a bank).

    The Ricketts benefit, and so do the Cubs. That seems desireable. Why is that a bad thing? How does that make Ricketts dishonest? Debt service is a legit expense of company operations and it is part of the net income/profit calculation. So why can’t he still be honestly saying he puts back profits into the Cubs? What am I missing?

    1. Kyle

      There’s no such thing as a mandatory sale requirement. There are only the seller’s demands, which can be negotiated.

      If the terms were so unfavorable that this Wrigley-empty, last-place mess was the only possible result, then Ricketts needed to walk away. All the other potential buyers did.

      1. Spriggs

        Maybe not mandatory, but we know Zell was looking for tax advantages. Maybe he got them all, maybe he didn’t. We don’t know how the negotiations went. And “unfavorable terms” is your term. Why should he have walked away? Did he not just make 32 million bucks according to some reports? Has the value of the franchise not increased already? Who says this was a bad or unfavorable deal?

        1. Kyle

          Unfavorable terms is the storyline Kaplan is trying to advance in his story.

          If they aren’t unfavorable terms, I’m fine with that too. That just means it is Ricketts’ fault things have gotten so bad, not the Tribune Co.’s terms of sale.

      2. jt

        That is the nut shell or at least one of the nut shells.

    2. Eternal Pessimist

      I don’t think the Cubs are benefiting at all. All the knowledgeable cub fans on this site were trying to understand how it was possible that at team in a major market like the Cubs (obviously the more easily marketed side of town) could only spend $100 million on payroll this year to balance out expenses, and I was quite happy to give them the benefit of the doubt. I felt that they would make the leap to a higher payroll when it made sense (that they could truly compete).

      Now it appears that they are willing to suck because of an arbitrary limit they have put into salary. I say arbitrary because they will continue to have growth in the value of the cubs as the asset already has a known increase in revenues coming from better TV contracts/advertising that is on its way very soon.

      If they put in an additional $50 million dollar equity payment this year because they have extra money lying around they could claim that they could only spend $50 million on payroll because they are “spending every dollar” on the team.

  7. Die hard

    Brett – kid I always knew you had it in you… tell it like it is without the apologies next time and Mike Roykos ghost will high five you…. With this piece since you will likely have to update your Resume after the season you may want to apply at Mike and Mike in the Morning

  8. TonyP

    Who is ready for all tax reform—– loopholes closed and a flat tax???????????????????????

    1. hansman1982

      YOU ANARCHIST!!!

      or wait,

      does that make you a communist/socialist/marxist?

      1. SirCub

        Nope, it makes him an atheist. SMH at all this ignorance…

        1. TonyP

          I am what I am, ignorant and all………..

        2. Internet Random

          Racist.

          1. TonyP

            I’m not a racist……………..

            1. Cubbie Blues

              Nor was he talking talking to you.

              IR, I believe a more apt term would be bigot. SirCub is bigoted toward ignorant people. :P

            2. TonyP

              i see, well SirCub can go shove corn cobs up his ass for all I care. Because I have a different opinion doesn’t make me ignorant.

              1. Cubbie Blues

                First, Hansman was joking. Second IR was joking with Hansman (follow the indentions) and not talking about you. Third, lighten up a bit it’s good to joke once in awhile.

                1. TonyP

                  I didn’t have an issue with Hansman or IR. Let’s just leave it at that.

                  1. Cubbie Blues

                    Let’s leave it at you took joking comments wrong and lashed out. I tried to let you know everyone was joking and still take offense. Other than that I think this conversation has been Zambrano’d.

              2. SirCub

                Oh great, so now you’re gonna be ageist about it?

                Not cool.

                1. Cubbie Blues

                  I am getting older and there is absolutely nothing cool with that.

                2. SirCub

                  I think there is some confusion here as to who’s calling who what. So allow me to clarify, if I may. Hansman called TonyP a ANARCHIST/communist/socialist/marxist. I called TonyP an atheist and Hansman an Ignoramous. Internet Random called me a racist. Cubbie Blues called me a bigot. TonyP called me a cornholeist.

                  I think the lesson that we learned here today, is that I’m rubber and you’re all glue!

                  1. SirCub

                    Oh, and I called someone a baptist, but I’m not exactly sure who…

                    1. Cubbie Blues

                      Can I say lol if I actually laugh out loud?

                    2. SirCub

                      You could, but then the linguists would be on you about it.

                  2. TonyP

                    I apologize, I was out of line….

          2. TWC

            Heh.

          3. SirCub

            Yea, this coming from a baptist.

  9. aCubsFan

    1. Let’s get something straight. The Cubs are a private entity!

    They have no responsibility to their fans or anyone else to be transparent with their finances. The only people that the Cubs must be transparent with are MLB executives, particularly Bud Selig, and their lenders.

    2. Brett, and other Cubs fans, must not have been paying attention when the sale was being discussed and went through, or forgot that the sale of the Cubs was highly leveraged in order to minimize their financial liabilities. It was discussed at ad nauseam throughout the process because it related to the bankruptcy proceedings and trying to get out of bankruptcy. That is why the Tribune Company still owns 5% of the Cubs.

    3. Brett and Cubs fans are quite naive to think that the Cubs and the Ricketts Family don’t have to serve debt during the course of the loan period. It’s also naive to think that the money loaned from the trust fund can be paid back without interest.

    And, to assume that when Tom Ricketts said “all revenue generated will be going back into team” that it meant it will go into buying players at the major league level and not pay debt service is equally naive, especially when Ricketts also said he wanted to build a winner from the farm system.

    The team means everything, including farm system, drafting players and paying over slot, and paying for the construction new spring training and Dominican facilities among other things.

    1. Kyle

      The Cubs are a franchise in a spectator sport. Their entire business model is based on the idea that their private business is of interest to us.

      Do they have a legal obligation to be open with us? No.

      Is lying to fans a foolish way to run their business? Absolutely.

      1. Cubbie Blues

        “Their entire business model is based on the idea that their private business is of interest to us.”

        The same could be said for any company that isn’t publicly traded.

        1. Kyle

          No, it couldn’t. At least not while honestly maintaining the meaning behind what was said.

          1. Cubbie Blues

            Yes, it could. If company ABC sells product X the company isn’t worth a hoot if the public isn’t interested in the product. Baseball is just the product of the Cubs.

            1. Kyle

              In many other cases, the product is something physical that the consumer gets to use. What happens to the company after I have the product in my hands has no impact on my future use of the product I bought from them.

              The Cubs’ product is their internal affairs: a baseball team and the support structure around it.

              1. Internet Random

                I think maybe a better way to make your argument is that, being in the entertainment business, the Cubs main message to the public is, “Hey, watch us! Watch us! Pay attention to what the Cubs are doing!”

                Therefore, they ought not to be surprised when people pay attention to what the Cubs are doing.

                1. hansman1982

                  I don’t think they are surprised. They could have handled things much better though.

                  Ricketts should have said:
                  “We are directing an appropriate amount of resources in a manner that ensures we can remain as competative as possible given our financial situation” (or something to this effect)

                  1. Internet Random

                    “I don’t think they are surprised.”

                    I have been known to speak figuratively from time to time.

                    1. hansman1982

                      So, are you speaking figuratively now?

                    2. Internet Random

                      No, I’m typing.

                  2. Kyle

                    *looks at record, looks at payroll, looks at attendance*

                    Nope.

                    1. hansman1982

                      In all fairness, he probably just should have ignored the question or given a broad, generic statement but if you are going to paint yourself into a corner, make sure it’s the corner next to the door or window.

                    2. Kyle

                      He should have said “Free nachos for everyone.”

                      That might have worked.

                    3. TWC

                      Free nachos? I’m there!

              2. Cubbie Blues

                OK, so, if I rephrased to
                “The same could be said for many companies that aren’t publicly traded.”
                It appears that we are in agreement. Note basically all I did was change any to many.

                1. hansman1982

                  Really, it only doesn’t apply to companies that only sell things to someone once in their lifetime or at incredibly infrequent intervals.

                  Even then, the Cubs are highly similar to any other company. The Cubs “consumable” product is the individual game which they have a fixed amount to sell it’s just that a large portion of their finances are already “open” to the public.

                  It’s also similar to Bleacher Nation, I have no idea if Brett could be spending more on the site or if he could feasibly move to Chicago and follow the team that way. If as much scruity was applied to the way he runs this site as the Cubs receive, I’d imagine the public could pick that apart in a similar fashion.

                  1. Kyle

                    Incorrect. The Cubs’ product is not the game. It’s the loyalty to the organization and team.

                    Very few of their tickets are being sold to people who just want to see an exhibition of baseballery. They are being sold to people who want to see the Cubs win.

                    1. Cubbie Blues

                      I never knew loyalty was a product. How exactly do you go about selling loyalty. What does it look like? No, I think the actual thing being sold is the game and merchandise. Now, you can have loyalty to those things just as one might about their particular cleaning product.

                      Any cleaning OCD’s out there? amirite?

                    2. Kyle

                      Being intangible does not make it not a product.

                      Sure, I’m taking a bit of poetic license with the words, and you can claim to be abashed in the face of the literal definition if you wish.

                    3. hansman1982

                      No, the game is the thing sold. I don’t see the Cubs selling many tickets to Wrigley Field on non-game days or on off days to watch the players practice.

                      Now, loyalty/winning does play in, just as it does with most items that are consummable. The loyalty is part of the WHY.

                      Tickets/games are the physical items that someone gets to “use”. Without the game, the shirts/beers/blogs/etc… cannot exist. The game can exist without those items.

                    4. Cubbie Blues

                      Yes, we were talking about a literal product. You were proved wrong so you
                      mortgage-goal-post_2199037b.jpg

                    5. Cubbie Blues

                      Pic size failure. Just to be clear there was someone moving those goal posts as you did.

                    6. Kyle

                      “Yes, we were talking about a literal product. You were proved wrong so you”

                      No. You just took one of a number of semantic interpretations and claimed victory off it. Hooray for your awesome victory! (Sorry it meant nothing in the terms of the actual discussion.)

                      “No, the game is the thing sold. I don’t see the Cubs selling many tickets to Wrigley Field on non-game days or on off days to watch the players practice.

                      Now, loyalty/winning does play in, just as it does with most items that are consummable. The loyalty is part of the WHY.”

                      Meaningless distinction. The Cubs are trying to move money from our pockets to theirs. Our interest in their success within a 30-team competition, including how well they run their organization, is the method by which they do so.

                    7. hansman1982

                      “Being intangible does not make it not a product.”

                      So, where can I go to buy a loyalty?

                      Loyalty can be used to sell an item, just like hunger, lust and happiness can be used to sell an item. I cannot purchase hunger, lust and happiness. When these items motivate someone to buy something, they aren’t buying loyalty, hunger, lust or happiness.

                    8. Cubbie Blues

                      Zambrano’d
                      Argument for arguments sake is not worth it. I’m going to go have a sandwich.

                    9. Ralph

                      “Incorrect. The Cubs’ product is not the game. It’s the loyalty to the organization and team.”

                      Is incorrect in itself – loyalty to the organization and the team is the “Brand” which has a value unto itself.

                    10. aCubsFan

                      You clearly have a skewed view of the Cubs product. They aren’t selling loyalty. They’re in the entertainment business.

                      Loyalty comes from a business satisfying their customers’ needs and wants to a point that the consumer wants to purchase again and again.

                      If you don’t feel the Cubs aren’t satisfying your needs stop following them, stop going to games, stop buying their merchandise.

                    11. Hansman1982

                      Yes, and loyalty/fandom/etc… Isn’t just a sports or entertainment ideal.

                  2. Kyle

                    To explain it better, Brett’s product is the news and commentary about the Cubs.

                    The Cubs’ product is their participation in a competition with 29 similar organizations and our interest in their success. How well they run their organization is an integral part of that success that they want us to root for.

                    1. hansman1982

                      No, Brett’s product is the articles he writes. Before BN, I am sure he had commentary on the news of the day in Cubs land, but didn’t offer any way for others to consume that.

                      “The Cubs’ product is their participation in a competition with 29 similar organizations and our interest in their success.”

                      So close…

      2. bbmoney

        I second what Kyle said. With the caveat that I’d add the word “extremely” right in front of “foolish”.

      3. When the Music's Over

        Totally agree. If there’s one lesson people should learn here, it’s that people shouldn’t have blind faith in many things those in charge have to say, especially when what they say has little negative long term consequences. I’m not saying to go all X-Files on the world and live by the trust no-one mantra, but rather that blind trust/optimism and refusing to at least try to read between the lines is not always the best route. Especially if history serves as a precurser to the future: eg, those in charge will say what they have to say in order to remain in charge, which often means keeping the masses blindly content.

        When I refer to long-term consequences above, in Ricketts’s case, spinning how money is spent in a positive manner helps keep attendance up and therefore money coming in the door. There are no real long-term consequences because once/if winning begins to happen on a regular basis, people won’t care that they were misguided by incorrect/untruthful spin. In other words, Ricketts was using the Cubs needing a long time to rebuild the right way as a bridge/smokescreen to hide the truth about the debt payments coming out of the MLB payroll, and the longer he could keep the smokescreen in place, the better.

        It’s this meandering dishonesty that has some people upset.

        1. aCubsFan

          Misguided? Meandering dishonesty? I don’t think the Ricketts have misguided fans or been dishonest. The fans have tried to parse every word said to find something to hang their loyalty on.

          Where was all this angst from Cubs fans in the 60s and 70s when the Cubs were losing a lot under the Wrigley regime? Where was it when the Tribune Company owned them and they had many losing seasons?

          If you don’t like what the Ricketts are doing and saying, turn the TV and radio off, don’t read the newspaper, stop watching SportsCenter or Baseball Tonight — stop following them.

          1. Kyle

            Where was all the angst?

            Welcome to Cubs fandom. Perhaps you are new? Perhaps you just aren’t used to hanging out with other fans?

            I can’t speak for the 60s and 70s, but when things were bad under the Tribune, especially in the 1990s, there was a metric ton of angst.

            If you don’t like what Cubs fans have to say about the team, please stop coming to Cubs fan commentary sections. But don’t tell us to shut up just because we have the audacity to criticize.

          2. Rebuilding

            This kind of argument really doesn’t make sense to me. I’m not a Ricketts fan, a Theo fan or a Dale Sveum fan – I’m a Cubs fan. So anyone who doesn’t agree what the aforementioned people do should just shut up? That sounds like blind religious faith

      4. aCubsFan

        Who says the Cubs have lied to the fans? I certainly don’t. I believe Cubs fans have read a lot into (insinuated) the words of the Ricketts that just aren’t there.

        1. Kyle

          I say it. And no offense, but I’m fairly certain I’ve spent a lot more time paying attention to and cataloguing dang near every word out of Ricketts’ mouth to the public for the last three years.

          He explicitly said they didn’t lose money in 2011. He said that the baseball budget would be the same for 2012 as it was in 2011. Now it’s becoming clear that the baseball budget was cut in 2012. He lied.

    2. Internet Random

      “That is why the Tribune Company still owns 5% of the Cubs.”

      No, it was to avoid a realizing event for capital-gains tax purposes.

    3. Patrick W.

      The Cubs may be a private entity and may not have a responsibility to share their private finances with their patrons, but seriously, they do not exist without the fans paying for the product. A key decision that every consumer makes before forking over money to a private entity is “do I trust this entity to give me what they say they will give me” and violating that trust is a really really bad business model.

      Saying every dollar coming in the door is going back into the organization is probably just not true. You may choose to go ahead and lump debt service payments as the organization but it’s a perfectly reasonable argument that it shouldn’t count.

      The very most basic way I can think about it is this: The Ricketts smashed open the family piggy bank (for a variety of reasons) to buy a machine that will produces something that people will buy from them. They are telling the people who buy the product “Every dollar you spend on our product we’ll spend on making the machine EVEN BETTER! Every dollar you give us will go to a better product” when in fact the truth may be “Every dollar you spend on our product will go to making a better machine, except for the nickle we’ll put back in our piggy back”

  10. mjhurdle

    At this time, I am generally ambivalent regarding the money the Cubs are spending.
    I don’t see the big FAs we missed out on because we didn’t offer huge money. Maybe Cespedes, but at the time he was an unproven commodity that i actually liked that they didn’t break the bank for him.
    Anibal Sanchez vs Jackson? at the time and for the money, i was happy to get Jackson.
    The fact that Jackson is scuffling and Sanchez has looked good so far does not make it fair for me to re-visit my opinion and complain after the fact.
    I really don’t care what the Cubs do with the money, or tell me they are doing with the money.
    Until the time comes (maybe this year, definitely by the 2014-2015 offseason) where i see the Cubs with a good base for a team and yet refusing to pay money for FAs or to keep talent, i still won’t care about the money.
    If they decided to pay off some debt when the payroll was going to be low because of baseball reasons, good for them.
    If they don’t resign Shark, if they aren’t competitive and landing some big name free agents, if they let every talent they grow leave to the Yankees because they don’t want to pay them; then i will be 100% on board with the anger towards Ricketts.
    Basically, im fine as long as they don’t become like the Pirates of the last decade or so.

    1. Eternal Pessimist

      But if their debt payments are $40 million a year, and they are counting that towards “putting every dollar back into the cubs”, then it is $40 million per year less to spend on free agent signings. This will certainly damage the product for the cubs fans.

  11. Kramden

    I’m wondering if the “master plan” is something like the profits generated by Wrigley with payroll pretty static as it is now goes towards debt reduction….

    And whatever profits are generated by all the new stuff stuff will go toward increasing the current payroll.

    1. Rebuilding

      Or to pay for the renovations themselves. That’s another $300-500 million

  12. Rebuilding

    Btw, welcome to the dark side, Brett. Just joking of course – as a responsible journalist (you’re the best one that covers the Cubs) I realize you have to get your ducks in a row before you make assertions as opposed to yahoos like me an Kyle. I’m not here to say yay I was right, this makes me sad because that debt (plus the renovations) is going to be around a long time. My grandfather just wanted to see the Cubs in the WS before he died and now my Dad is starting to say the same thing.

    One thing I would say is to those that reflexively defend the ownership/the FO/Dale Sveum – from now on I hope there can be a more reasonable discourse because just because some of us might point out unpleasant things doesn’t mean we love the Cubs any less. I want whats best for the Cubs, not those people. The fact of the matter is that Ricketts is the worst of all worlds as an owner. His Dad built that business and made that money – Tom is a trust fund baby and has not demonstrated one shred of business acumen. Old Joe isn’t giving him any more money – he’s been cut off and we are going to suffer for it

  13. Around the League: Jeffrey Loria in Hot Water, Hawk Harrelson on Sabermetrics, and the Yankees’ Money Issues | Bleacher Nation | Chicago Cubs News, Rumors, and Commentary

    [...] some heavy stuff on your plate earlier today, how about some lighter fare from around MLB [...]

  14. curt

    I’m sure this has been asked but this whole test it down and build up the farm system and then in s couple yrs add free agents , if the ricketts are paying down the loan by using revenues that would otherwise bd used for baseball operations , Will there be money to spend on those said free agents. Or are thd cubs going to have to wait for the new revenue streams to kick in.

    1. Rebuilding

      That’s the million dollar question

  15. Amie

    Tell me which free agent bat did you want? To me the reason none of the big names were signed was that they wanted contacts for to many years. That would be like shooting ourselves in the foot. If the Ricketts are having any money issues, I believe it might have something to do with that previous deal where the renovations would be in part paid for by by the state, and/city. Now their having to foot the bill themselves. Money does not grow in trees folks.

    Someone said these were bad owners? Are you nuts!! At lot is different from when Theo first came, but first and foremost is the CBA. I guarantee you he doesn’t what to sign some free agent for 6 years just to get a bat and please Cub fans. Good for him too. He likely is most surprised at how silly many of our fellow Cub fans are. We are not being smart at are, and have no idea about the current climate in baseball. Things have changed, try writing about that.

    1. Internet Random

      “Money does not grow in trees folks.”

      No, but pecans do, and you can sell those for like $20 a pound.

      1. jt

        yeah, but they have to be picked or shaken from the stems or something…
        sounds like a lot of work.

        1. Spriggs

          …and dangerous machinery may be necessary too.

  16. jt

    Things gotsta balance!
    Ricketts has both a dept obligation and an obligation to build a business that will sell.
    He needs to create enough revenue to both pay obligations and to invest in order to create a product he can sell. It seems he is mult-tasking as in trying to the three simultaneously.
    It also seems that he has a plan that does not involve spending huge sums over many years for players such as Soriano. To paraphrase Theo, the team is looking or looking to create players with a foundation of strong basics.
    IMHO, that is the way a business should be managed.

  17. AJR

    Look at in in terms of percentages, 20-40 million sounds crazy but a 1-3% on their money doesn’t seem all that bad or greedy by any stretch of imagination. They would had to pay someone else as well. You do not know specifics and I think this is all speculation and BS. They are a financial family, I am sure there is a reason and until you put your family at financial risk in 2008, then please just stop speculating and creating unnecessary issues. They are building up the city and providing taxes and revenues for the city and neighborhood that is much needed. They are a great contributor to the community. I have worked for two sports franchises, I rarely saw the owners and the Ricketts are hands on and put their heart into it. Why wouldn’t you structure it in a way that would be advantageous to you?

    1. Dave

      Great contributors to the community GOOD for them!
      One thing they have not proven good at is fielding a successful baseball team.
      As a fan that’s all I care about.

  18. Still Love the Cubs

    I know I’ve been beating this drum for a couple of days, but I have to say it one more time.

    I really don’t feel this is new information. The only reason that it seems new is the Ricketts statement of every dollar going back into the team. I don’t think that he actually said every dollar would go back into baseball operations.

    It helps the team to pay down the debt so it is not hanging over them. And why not do it while they are in a rebuilding mode anyways.

    To this point, I have heard nothing that convinces me that if the FO needed more money for something they felt was value, that Ricketts would tell them no.

  19. Eternal Pessimist

    Why is the time stamp for these comments reflecting East Coast time zone? Is Brett really just a Yankees fan playing with the emotions of Cub fans???

  20. Dan

    Between the minor leagues, the draft, the building of the Dominican facility and other “baseball” related activities – including but not limited to: Payroll, management salaries, scouting, travel, etc – the Rickets is spending over $150 MILLION a season – I think everyone is looking into Theo’s comments when they were really, we are maxing out our budget how we see fit and we are not “holding back” funds for a rainy day – He’s too deliberate to actual say something that can be interpreted like everyone is trying to do.

    1. Kyle

      Unfortunately, add all that up, and it’s several dozen million short of accounting for the decrease in MLB and amateur spending.

    2. Pat

      How many more years is the Dominican facility going to be used for an excuse for where money is going? It was only five or six million in the first place.

  21. Aaron

    I feel the Ricketts weren’t really honest with the fans of the Cubs when it came to available revenues, especially if the paying of the principal and interest for the loan(s) to purchase the club, are taken from the operating surplus of the club.

    I understand that Major League Baseball is a business, and you have to account for revenues, expenses, profit, etc. However, owning a major league franchise, especially the Cubs, comes a responsibility to the fans to do whatever it takes to put a highly competitive team on the field, for that team to make the playoffs, and then see what happens. The Ricketts are feeling the “heat” from fans across the country as the financials of the club are being debated, particularly as they affect the club’s ability to win.

    Losing certainly brings out the worst in fans. The team’s roster is full of holes, which is somewhat a product of available resources. The new owners, including the leadership team of Theo, may be in for more than they expected when they got involved in this mess. I suggest they be honest with the fans and be as transparent as possible in their operations. In the long run, it will be best for everyone involved.

    1. Dan

      How were they now honest? Rickets said at the start that he didn’t feel that spending $140,000 million dollars a year in a ballpark that lacked modern features was possible because…well…it’s not – They dropped 40 million dollars of payroll but do you blame them? The team isn’t bad because they aren’t spending money – the team is bad because for years they spent money – on BAD PLAYERS – then they didn’t spend money on GOOD PLAYERS IN THE DRAFT…

  22. JB88

    This may have been addressed in the comments (and if it was my apologies for recovering material), but I think one of the concerns this has to raise is whether Theo & Co. are likely to re-up after 5 years if they believe that the Ricketts’ fed them a line about the availability of funds.

    This is quite honestly my biggest concern and a bigger concern to me than whether the Cubs in rebuilding years are chosing to use some payroll for debt service.

  23. Die hard

    Brett….On the other hand—” some say” (ala Fox News) that Ricketts wanted to lower expectations thru a source in addition to Theo and thought why not have BN do an exposé making Ricketts bad guy so can only go up from here to be the Hero if Cubs start playing contending ball…a homegrown attack piece as they or some say.. I’m not saying that’s what Today’s piece was as Iwant it to be true… Which could be what Ricketts was counting on… As they or some or PT Barnum says– there is a sucker born every minute

    1. TWC

      My goodness, the conspiracy theories that have been growing around this place are mind-boggling, 100% batshit crazy.

      First the super-secret “Borbon is the first part of the Garza trade” absurdity, and now this suggestion that Bleacher Nation was directly (or indirectly) manipulated into casting Ricketts’ ownership in a bad light so that he’d look like a hero when the Cubs start competing? Really. You really think that. Insane. Completely in-fracking-sane.

      1. Die hard

        Eh — check Brett’s post yesterday about Garza Rangers deal on hold

        1. TWC

          Oh bullshit, Die hard. You’re either a trolling liar or delusional. I’m leaning towards both.

          1. JulioZuleta

            I’m confused. I thought we established this 18 months ago. Let him be, he gets bored when no one bites the bait.

            1. TWC

              He just has this way of getting under my skin.

              I’m still not convinced he’s not secretly my father-in-law.

              1. JulioZuleta

                Hah. I know what you mean. Some get under my skin/are hard to ignore. I guess I’ve just gotten past that urge in his case.

                1. JulioZuleta

                  Brett, did I hit some kind of post limit for the day? (post says awaiting moderation.)

          2. Die hard

            Then you haven’t checked it out— and unless you are a zillion jointed you can’t lean in two directions at the same instant– even Gumby couldnt

            1. Internet Random

              That would only be true if being a trolling liar and delusional were mutually exclusive.

          3. Die hard

            Check item 4 in yesterday’s Lukewarm Stove from Brett– quite the teaser he is

          4. Die hard

            Check #4 in Yesterday’s Lukewarm Stove– quite the teaser he is

          5. Die hard

            After you check Yesterday’s post #4 you don’t have to apologize– just acknowledge I was right would be enuf

            1. Hansman1982

              I have a feeling you think item #4 from yesterday was important.

              Well said TWC, BTW.

  24. Internet Random

    Don’t moderate me, bro!

  25. Daniel

    So, I’m not trying to be a dick, but, I guess I just don’t get it, and I don’t get the criticism.

    I’ve ran, and partially owned a restaurant. We paid debt from the restaurant with money gained from the restaurant. I see it as the same thing. The money isn’t going anywhere but the business. Even if I was telling the employees that I was investing everything back into the restaurant. Which I would feel I am. Debt services are a business expense, right? I guess I just don’t understand these things very well.

    Don’t read this as a judgement, or me being a dick, but it SEEMS (not calling anyone names) like people are being a little selfish with the money and how it’s allocated. I don’t think that it’s fair to assume that the Rickets would just shovel out money (over a billion with the renovation $) and not expect the debt services to come out of cubs money.

    Just my 2 cents. But, like I said, I don’t understand this stuff nearly as well as a lot of people.

    1. Kyle

      OK, so let’s imagine that in order to pay that debt, you cut costs by lowering the quality of the food and service in your restaurant.

      This caused fewer customers to come to your restaurant. This lowers your revenue, and forces you to lower the quality of the food and service even more. It becomes a spiral that feeds off yourself.

      You would be running your restaurant poorly. If people cared about how you ran your restaurant, they’d criticize you for it.

      1. Daniel

        Fair enough. And understandable. Have to ponder it.

        1. BT

          You might be running your restaurant’s finances poorly. But you wouldn’t be a liar.

  26. Mike F

    My take is simple. Tom Ricketts is a big boy. He understands what he got himself into. They did one of the dumbest things ever seen, namely letting papa Joe introduce politics. I am card carrying R, but the whole damn thing with that was idiotic. As was keeping Crane baby. I don’t feel sorry for all of us as fans, or for Tom. The model is simple, put butts in seats. And bluntly if this continues the problem of that lacking will continue. Dave Kaplan is a good guy, but he’s shilling and playing a lackey.

    The Cubs product is bad, and if consumers act rationally it will take care of itself. To some extent it is already. Next time at Wrigley take a look at the empty seats, or better yet vote with butt. One other thing I find amusing, somewhere there’s a statement as tho how brilliant Bud Selig is. Sorry, but that is something that is errant. At the end of the day there are no victims here, just whining.

  27. Die hard

    Some of the points made centered on Bud being too astute to allow the Cubs to pay a vig more than 2 points— yet looking at empty stands tonite one wonders if Buds days as Used Car Salesman of the Year are long past— how did he allow the Marlins to get into this mess? Toronto is up next followed by Astros… Point is Bud doesn’t give a flying futz as long as he can play King… It’s every knight for himself

  28. Alex S

    That picture of Ricketts has always made me think of this, so here:

    4qoe20wib

  29. KBwsb

    I’m truly sickened by the amount of justifying, rationalizing, and all-around brown-nosing some posters are displaying for the Ricketts family on this issue.

    How is this a complicated issue? When they took over the team, we had one of the top 5 payrolls in baseball (top-3?). With each successive year, it has dwindled considerably, to where it’s now merely middle-of-the-pack. This isn’t some hard-to-discern philosophy, it’s freaking MATH.

    Tremendous article, Brett.

    1. Internet Random

      “When they took over the team, we had one of the top 5 payrolls in baseball (top-3?).”

      When they took over the team, it was in bankruptcy.

      1. MIkeL

        Not to mention the draft and development side of things was fairly neglected. We also had one of the smallest front offices in baseball, often operating with out of date technology.

      2. Kyle

        No, it wasn’t.

        1. MIkeL

          Yes it was.

          1. Kyle

            The Tribune Co. was in bankruptcy.

        2. Internet Random

          You’d better tell Bloomberg: http://j.mp/14DsDrF.

          1. Kyle

            I go to the box two minutes and feel shame.

    2. Hansman1982

      Well, spending money just on free agents is a terrible idea when you don’t have the farm system to supplement it.

      1. JR

        Yeah the big time guys who have gotten paid would be old, crusty, and overpaid dudes when the Cubs will finally be good in 2015 and 2016. I can’t imagine the Cubs being stuck with the likes of Hamilton, Pujols, and BJ Upton in a few years when it matters. Payroll is down because players haven’t made sense..

      2. Kyle

        Not spending money when you don’t have the farm system is even worse.

        1. JR

          Spend money where? So is it a good idea to have the likes of Josh Hamilton on this team when they have a ridiculous amount of flaws?

          1. Kyle

            Maybe spend it to try to fix the ridiculous amount of flaws?

            Crazy, I know. But just crazy enough to work!

            1. JR

              Nah it’s not crazy, but it doesn’t make sense either. So lets have Hamilton making $25 mill on the payroll in 2015 when he is done, and we then can’t spend that money on guys who could help bring a chance for a ring. I don’t think there is a perfect answer. It’s just a shitty situation they’re in these days..

              1. Kyle

                No one brought up Hamilton but you. You need to show just a tiny bit more imagination and understand that there are levels between “ZOMG GIVE A HUGE DEAL TO THE BIGGEST FREE AGENT” and “The amount of money we spend right now is the perfect amount of money.”

                1. JR

                  Come on now, Hamilton was CLEARLY just an example. I’m all for the Cubs spending assloads of money, but not for turd contracts that hurt the Cubs when they have a chance to win. Because they have no chance no matter who they signed this year.

                  1. Kyle

                    So why did Epstein spend all the money that was available to him, if they had no chance no matter who they signed?

                    1. BT

                      Because the guys they signed either cost nothing, cost something and could be flipped later this year for prospects, or cost a bit and will theoretically help the team when their window of opportunity opens.

                    2. Kyle

                      That’s an awfully convenient explanation.

                      “Epstein spent all the money he had, and that was the *exact* amount of money that was appropriate to spend on this team, and any more money would not have been productive” seems to be the argument here.

                    3. BT

                      What the hell are you talking about? He had money to spend, he spent it. He spent all the money available to him (If that’s what he did) because the guys he signed could help him down the line in one form or another, not so he could win 5 more games this year to make you happy. Could signing other guys have helped more? Certainly possible. Could spending more this year have helped down the line? Maybe, depending on who it was. Who is claiming he signed the exact right amount?

                    4. jt

                      On whom would you spend money?

                    5. Kyle

                      “What the hell are you talking about?”

                      I don’t think it’s that hard to follow. This conversation started with yet another iteration of “it sure is a great plan not to spend money because the team isn’t that good because of the farm system.”

                      That idea has always been wrong, and at this point it has practically been repudiated by Epstein himself.

                    6. JR

                      I understand your point. But my point is the right dudes weren’t available. I rack my brain constantly trying to think of what the Cubs should do. The one thing I have decided on is there isn’t an exact answer. Hopefully they get lucky with a couple guys, and draft and develop well. It is an extremely frustrating situation. Hell, Soler and Baez are struggling at High A. The cubs are a ways off. Not good..

                    7. Kyle

                      Of course some right dudes were available. Are you saying there wasn’t a single player available this offseason that wouldn’t have been an upgrade on this roster or fetched something good in a trade down the line?

                      If Epstein had another $15 million available to him last offseason, we would have had $15 million more worth of stuff, and that would have been a good thing.

                    8. JR

                      That’s not what I am saying at all. There were all kinds of upgrades avail this past offseason. My point is that I wouldn’t want any of them on the 2015/2016 Cubs making ridiculous coin when the Cubs truly have a shot to do something. It’s pretty simple… I disagree with a lot of crap Theo has done, but this I agree with.

                    9. Kyle

                      “That’s not what I am saying at all. There were all kinds of upgrades avail this past offseason. My point is that I wouldn’t want any of them on the 2015/2016 Cubs making ridiculous coin when the Cubs truly have a shot to do something. It’s pretty simple… I disagree with a lot of crap Theo has done, but this I agree with.”

                      Which again makes me wonder why you associate more spending with long-term, ridiculous contracts.

                      Epstein didn’t not spend more because he was avoiding long-term commitments. He didn’t spend more because he maxed out his budget.

                      The payroll stuck at $106 million isn’t some sort of brilliant gambit by Epstein. It’s just how much he’s got to spend.

                  2. JR

                    Kyle, I think the disconnect here is I don’t know what players you’re talking about? Who are these players they should have signed that would not have effected the Cubs team negatively in a couple years when they finally have a shot? I guess Zach Greinke maybe? Maybe they should have upped their offer more on Sanchez?

                    1. Kyle

                      I don’t see any reason it has to be narrowed down that specifically to be an important point.

            2. Internet Random

              Oh, you mean like increasing spending on the FO, draft, and farm system? Then I agree.

          2. Internet Random

            So you don’t think putting $4,000 dollars’ worth of rims on a $700 hooptie is a wise investment?

            1. Kyle

              Same as above.

              Epstein has specifically repudiated your idea that he’s voluntarily not spending more money. If he had more money to spend, he’d be spending it, and that would be a good thing.

              1. Hansman1982

                So what happened to Epstein being a cagey double speaker?

                1. Kyle

                  He abandoned it for a direct approach, apparently.

              2. Internet Random

                “your idea that he’s voluntarily not spending more money”

                First, please try to pay attention. I didn’t say that.

                Second, are you now arguing that they should be spending money that they don’t have?

                1. Kyle

                  First, you clearly implied it.

                  Second, I’m saying spending more money would be a good thing and we should be annoyed with the people who have caused them not to have it, not make silly car analogies that imply that spending more would be futile.

                  1. Hansman1982

                    The $64,000 question is: are we talking about $5-10m that is “missing” or $40M?

                    I still think the fact we are talking like this means its half Epstein/half ricketts.

                    1. Kyle

                      I’m leaning toward 99/1 Ricketts.

        2. Hansman1982

          Ya, then you get folks crying about payroll levels.

  30. Die hard

    In defense of the Ricketts plan avoiding high priced underperforming free agents is a good thing as is making farm system #1 and making the park more fan friendly so seats will be filled even with subpar teams— last thing they want is Marlins situation which result in team moving or folding

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