The Dodgers’ Payroll Situation Is Far from Dire
The Los Angeles Dodgers have been incredibly successful on the field under the Guggenheim Group, winning four straight division titles and twice coming within two games of a World Series appearances. Not only does the club possess a massive television contract with Time Warner, but they’ve also drawn more than 3.7 million fans in every season under the current ownership group. The team has also been at the top of Major League Baseball payrolls — and, including competitive-balance tax money, has paid out roughly $1.2 billion in salaries over the past four years. There are rumblings that those payroll figures could come down quite a bit, with a detailed piece from Bill Shaikin in the Los Angeles Times indicating how and why payroll could be reduced.
Shaikin does a good job separating the Dodgers’ debt issues from their payroll concerns. While obviously related at some level — both matters are relevant to the Dodgers’ financial health — the one doesn’t necessarily affect the other. According to the current (and expiring) collective bargaining agreement, teams are forbidden from carrying a franchise debt in an amount greater than eight to 12 times the team’s earnings. (The exact multiplier depends on a few different factors not worth exploring here, and how earnings are calculated and why it matters are explained in this comment.) The rule exists to ensure the financial security of all MLB teams, limit outside influences, and make certain that teams aren’t in danger of going under. The Dodgers’ ownership group has been given five years as a grace period before the rule applies to them, giving them another year to address their debt.