Pirates: Money's being spent strategically
At a time when some major-league clubs are trimming budgets, the Pirates have increased their spending in several key areas.
The Pirates have not ramped up their player payroll, the most obvious expenditure in the eyes of most fans. Instead, they spent more for facilities, scouting and player development the past two years.
That is consistent with owner Bob Nutting's stated plan for improving the team's on-field performance by focusing on homegrown talent instead of high-priced free agents.
Pirates fans have no choice but to take team president Frank Coonelly at his word that ownership is funneling its revenue to cover those spending increases. The Pirates refuse to reveal specific dollar figures.
"We're not going to allow comments and speculation to make us change our practice and all of the sudden open our books," Coonelly said.
According to data provided by the team, the Pirates since 2007 have spent more than $11 million on long-term capital improvements. The club also boosted scouting, the draft and international player signings by more than $10 million.
According to Coonelly, the Pirates have poured their operating profits back into the club and also "had to borrow very modestly," which added to the team's $100 million debt.
"Our investments have been strategically made to build a foundation that will allow the club to compete over the long-term," Coonelly said. "While we have made painful cuts in our business-operations expenses, we have continued to increase our spending on our baseball foundation."
Coonelly provided limited data about what has been spent the past two years on player acquisition (via the draft and internationally) and development. The $11 million influx for baseball capital improvements included:
• Construction of an academy in the Dominican Republic for $5.4 million;
• Renovations to Pirate City, some of which were paid for by the city of Bradenton, Fla.;
• Equipment and facilities upgrades at PNC Park and Pirate City, such as the installation of ProBatter video pitch simulators;
• Purchasing a low Class A team and relocating it to Bradenton. The cost of that franchise was around $3 million.
Since 2007, when Coonelly was hired as part of a front-office overhaul, the Pirates have increased their budget for the draft by $8.3 million and upped their budget for international free-agent signings by $1.87 million. In that same span, the team has nearly doubled its domestic scouting staff (14 to 25) and increased its international scouting staff (19 to 33).
Because of revenue sharing, the Pirates have turned a profit the past six seasons.
MLB's revenue-sharing plan was initiated in 1997 and revised in 2002. This year, the system will dole out about $400 million to more than half of the teams in the majors.
Revenue-sharing money must be used for baseball operations, a purposely vague term which covers more than just the salaries of players on the 40-man roster.
MLB does not publicize its revenue-sharing payouts nor how each team uses the money. However, that data is shared with the players' union, which could — but never has — file a grievance if it believes the funds are being misused.
According to published reports, the Pirates received about $35 million in revenue-sharing money on top of about $40 million from the central fund. Coonelly has disputed those figures, saying only that the Pirates' income was less than that $75 million total.
Rob Manfred, MLB's chief labor executive, declined to comment for this story. Revenue sharing is an especially sensitive issue for baseball, as the system could be a sticking point when the collective bargaining agreement expires in 2011.
"I don't think there's anything wrong with the owners trying to make a profit," said baseball analyst Gary Gillette. "It's in the time-honored tradition of American capitalism for people who run businesses to not tell people what they're really trying to do, which is to make money.
"On the other hand, if what the Pirates are doing is hoping to be competitive without ever really taking a chance, that's taking advantage of the fans."
Gillette is editor of "The ESPN Baseball Encyclopedia" and author of "Big League Ballparks." He also is former co-chair of the Society for American Baseball Research's business of baseball committee
"While no one will say it, what the owners of (small-revenue) clubs have concluded is, they can cash the revenue-sharing checks, keep expenses low and make a guaranteed profit every year," Gillette said.
Despite the spending increases, the Pirates remain a sub-.500 team. Some may ask why the Pirates don't simply take their profits, even if, as Coonelly suggests, the amount is less than $10 million annually, and spend it on free agents.
Coonelly laughed at the suggestion. The average major-league payroll is about $100 million, he noted, while the Pirates' has been about $50 million.
The team has $32 million committed so far for the 2010 season. Recently, the Pirates made cost-cutting moves by allowing closer Matt Capps and lefty Phil Dumatrait to become free agents.
"We can't even approach getting to the major-league average with the current revenue sharing and revenues we generate locally," Coonelly said. "So taking $5 million or $10 million and adding it to our major-league payroll is not the most effective way for us to invest that type of money."
At baseball's annual winter meetings, a marketplace for free agents and trade talk, the Pirates made just two moves. They signed free-agent infielder Bobby Crosby for $1 million and claimed Triple-A outfielder John Raynor in the Rule 5 draft.
Neither move was flashy. Yet, as John Clark, a sports-management professor and head of the MBA program at Robert Morris University, pointed out, flash doesn't always lead to victories.
"Just because you spend money, it doesn't mean you're going to win," Clark said. "Just look at payroll going into this past season. No. 1 was the Yankees, and they won. No. 2 was the Mets. How'd they do?"
The Yankees had an Opening Day payroll of $201.4 million and won the World Series. The Mets spent $135.7 million and finished fourth in the NL East with a 70-92 record — only eight more wins than the Pirates, who spent $48.7 million.
In 2006, when the Pirates were in the black by about $25 million, they had a $46.7 million payroll. PNC Park played host to the All-Star Game. The Pirates had added $8.6 million to their major-league payroll, a 23 percent increase over the previous year.
Yet, at the All-Star break, the team was 30-60 and hopelessly out of the race.
"If the Pirates spend an extra $20 million this year, they could get one or two top-tier players for a year," Clark said. "There's not a player out there who they could get who would send the town a-twitter."
Comparison of 2009 Opening Day payrolls and final standings in National League Central Division:
Team: Payroll — W-L
1. Cardinals: $77.6 million — 91-71
2. Cubs: $134.8 million — 83-78
3. Brewers: $80.2 million — 80-82
4. Reds: $73.6 million — 78-84
5. Astros: $102.9 million — 74-88
6. Pirates: $48.7 million — 62-99
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