Heading into calendar year 2013, Standard and Poor’s lowered the rating on bonds used to finance Citi Field to BB, which is two levels below investment grade, and down from their BB+ downgrade the year before. The ratings agency predicted Mets attendance would continue to drop in 2013, that the team’s on-field results would worsen, and that ownership’s ability to cover continuing financial losses would further be depleted.
With regards to attendance, Standard and Poor’s was spot on. In 2008, the Mets led the National League in attendance, drawing 4,042,045 during Shea Stadium’s final season. In Citi Field’s inaugural season, the Mets drew 3,168,571 fans. Since then, attendance has dropped by a full one million customers. Attendance fell to 2,559,738 in 2010, and to 2,352,596 in Citi Field’s third season. In 2012 the Mets drew 2,242,803, and this past season drew only 2,135,657 fans. So S&P was correct, as Citi Field attendance dropped for a 5th consecutive season, and overall, also came precariously close to falling below two million for the first time since the 1997 season.
On the field, the Mets won 70 games in 2009, then spiked in 2010 with 79 victories. They fell to 77 victories in 2011, and posted just 74 victories the last two years.
Instead of worsening as Standard and Poor’s predicted, you might say the Mets stabilized themselves by posting duplicate 74 loss seasons, and finally appear poised for an uptick this year.
Heading into the 2014 season, the Mets are now expected to be a better team, and not a game too soon, for ownership desperately needs measurable on-field improvement.
Sandy Alderson’s three seasons spent replenishing the farm system, executing shrewd trades, ridding the payroll of onerous contracts, and recently acquiring a few free agents, must now all pay off in the form of wins. Exactly how many wins is an open debate, but all the GM’s efforts to date must at least culminate in a .500 season, which would be the Mets’ first at Citi Field.
Validating Standard and Poor’s preseason contention that ownership’s ability to cover losses would further be depleted is obviously a more complicated matter. The Mets owners stand on somewhat firmer ground today than they did two years ago, but are still waist deep in financially troubled waters. Although ownership was indeed wrung dry of its final cent last season, and still survived, they remain mired in heavy debt.
Following the dollar trail has not been easy. In order to understand what lies ahead in 2014, we must quickly review the recent past. In December of 2008, Bernie Madoff was arrested for orchestrating perhaps the largest Ponzi scheme known on Wall Street, which in turn, triggered the financial implosion in Flushing.
In Citi Field’s first season of operation, the Mets incurred a $9 million dollar loss, largely because attendance fell 400,000 below projections. This was partly Fred Wilpon’s own initial folly, for promising the banks Citi Field would draw in excess of 3.5 million fans per season.
If you remember (or not), Fred Wilpon and former partner Nelson Doubleday feuded over the future of Shea Stadium. Doubleday wanted to renovate Shea, while Wilpon wanted to build a new park. With what we know today regarding the dubious nature and usage of Wilpon’s Madoff accounts, I suspect Nelson Doubleday knew exactly why a new field (at the time) was out of the question. Needless to say, by the end of 2002, their falling out was complete, as Fred Wilpon paid Nelson Doubleday a handsome sum for his half share of the Mets. It was on the heels of that expenditure, that new sole patriarch Mr. Wilpon then applied to banks for financing on a new park, and eventually allowed Omar Minaya to raise payroll again.
The Mets then reported operating revenue losses of $51 million in 2010, and a crippling $70 million for the 2011 season. Through the purging of high end salaries, losses were minimized to $23 million in 2012, while in 2013 the estimated operating loss hovered around just $10 million dollars.
Back in the immediate aftermath of the Madoff mess, the club’s initial infusions of cash came in the form of a $25 million loan from Major League Baseball and $40 million more from Bank of America.
By early 2012, the Mets additionally completed sales of twelve minority shares in the team, valued at $20 million per, which infused $240 million into the organization. $60 million of that came from within the Wilpon and Katz families. Comcast and Time Warner Cable, fellow partners in SNY, purchased a pair of shares each. One share was sold to Steven A. Cohen, and one share was purchased together by Kenneth B. Lerer and Robert W. Pittman. Owner identity of the remaining three shares remains private.
$65 million of the proceeds went to repay their overdue MLB loan, and debt owed to Bank of America. A considerable sum of $110 million went towards refinancing near $400 million in bank debt, and $43.5 million went towards making bi-yearly payments on Citi Field.
In 2012, the Mets successfully refinanced upwards of $450 million dollars of outstanding debt at low interest through SNY, and borrowed $250 million more, for an understood total negotiation of $700 million dollars.
After paying past-due bills, the Mets were left with roughly $160 million of the $250 million loan to cover 2013 operating expenses. Slightly over $90 million then went towards last year’s payroll, while the other $70 million went towards bringing down debt. Every dime was effectively allocated.
Covering their expenses in 2014 represents a whole new adventure. The Mets seem to have exhausted most, if not all their financial options. Mr. Wilpon has borrowed from MLB and banks, borrowed against his own stake in the club, refinanced loans, resorted to selling off shares of the team, dipped into personal family finances, and tapped into the club’s alternative assets, namely SNY and their partners. There appears to be no place else to seek financial relief, other than Citi Field itself, and only then, with an appreciable rise in attendance.
Much of Citi Field’s $43.5 million bi-yearly bond payments are financed by game day revenue. So, the real question is, will Sandy Alderson’s efforts finally translate into increased attendance? Will the additions of Curtis Granderson, Chris Young, Bartolo Colon, combined with the potential promise of a new generation of young players be enough to inspire fans into crashing the gate this season?
That is a question we fans should all reflect on. There are those who believe the club should spend first, in order to entice fans out to the park, and there are those who believe up-front patronage is helpful in getting things turned around. Whichever side of the fence you stand, we are still part of a symbiotic relationship. At some point, attendance, fiscal stability, and the on-field product need to be brought in harmony.
Ownership and management, the players, and we fans all have a role in raising this club back to prominence. But ultimately, either ownership, or the fans, have to make the first move, and wait for their payoff on the backside. Because of the contentious relationship which has existed between ownership and a beleaguered fan base, the situation at Citi Field has devolved into a game of chicken.
This off-season, the club took a good faith, first step forward. But in real application, the Wilpon’s did not add payroll. They merely reallocated the same money towards new players. New players, in turn, may perhaps spur different results, and set a successful domino effect in motion. Although doubtful, a spike in attendance could also ideally allow the club to proactively add a player and likewise increase payroll by this year’s trade deadline.
Just don’t hold your breath. Last March, Forbes valued the Mets at $811 million dollars, which was up over the previous two years. And when paired with ownership’s holdings in SNY, the combined worth exceeds two billion dollars. However, upwards of 50% of that worth has been leveraged in the post-Madoff recovery period, which means the Wilpons still have a mountain of debt to overcome.
In 2014, they have an outstanding $250+ million bill due to banks in June, which despite repeated attempts, they have failed to refinance, and near $600 million more due in 2015 to SNY. And as previously stated, the Mets owe bi-yearly payments of $43.5 million dollars on the bonds used to finance Citi Field. In terms of 2014 liabilities alone, the Mets will owe roughly $90 million again towards payroll, $87 million more towards Citi Field, and a $250+ million dollar call on their debt, for a loosely projected outlay of $427 million dollars.
Comparatively, Forbes listed Mets revenue for 2013 at $232 million, $225 million in 2012, and $233 million in 2011. In terms of operating income, the Mets operated at a $2.4 million deficit last season, a $40.7 million deficit in 2012, and a $6.2 million deficit the year before that. The math simply does not compute in favor of ownership.
All the above numbers and figures have been variously interpreted, but nevertheless arrive at the same basic conclusions. The Mets are still in deep trouble. We know how, and from where the Mets secured their operating budget last year. But how will they cover their expenses this year or next? A rise in attendance alone will not make all their troubles disappear, but for the moment, our patronage is what ownership desperately needs most.
We are, in effect, the team’s lenders now, and their books say they owe more than they can generate in revenue over the next two seasons.