November 8, 2014

BUDGET LEFT OVERS

Tom Ricketts was recently on Chicago radio. During his interview, he confirmed what I suspected for a long time.

Ricketts stated that the way he budgets, he takes all the revenues, then deducts all the expenses, and what is left over can be used by the baseball operations (such as adding free agents).

However, Ricketts was speaking in a more big picture model as he said that some of the expenses were geared toward the Wrigley reconstruction costs.

As posted many times, the Cubs are a separate legal entity from the corporate owner of Wrigley Field proper. The Cubs are merely a tenant, who may fully or partially share Wrigley revenues (concessions). Parking lots are owned by another separate entity. So when Ricketts says gross revenue, it seems he means "all" affiliated revenues, minus "all" affiliated costs to get to a rainy day fund number.

This also confirms what we learned when Ricketts bought the team. His bankrolled father said that he would not put any more money into the franchise operations. In other words, the Cubs had to be self-sufficient with no new capital calls. (This was also a requirement in the Zell partnership deal, as the Tribune retains a 5% stake). So Ricketts was cornered into having to field large debt service, a massive Cubs payroll and declining attendance revenues.

With the lack of the WGN games on a new local televisions outlet, "gross" revenues are projected to be lower in 2015, which means lower possible payroll numbers for the Cubs team since Wrigley expansion costs are coming hard and fast this off-season. This is why the team accelerated the deposits on season ticket sales . . .  there appears to be a cash flow issue with the team.

So the Cubs, as a baseball operation, is the cornered stepchild in the dinner line. It will be the last aspect of the sports entertainment complex to receive added funds.