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New PBA deal remains under wraps

by Will Lingo
October 7, 2004

So while we were busy watching major and minor league teams negotiate new affiliation agreements—known in the industry as player-development contracts, or PDCs—we forgot about another important acronym: the PBA.

The Professional Baseball Agreement governs the relationship between the minor and major leagues, and until a decade ago its renewal was a mere formality. It simply provided the specifics of how Major League Baseball would prop up the minors, so there was little need for change.

In 1990, however, MLB recognized how successful the minors were becoming and started asking minor league teams for help in bearing the cost of player development. It started a contentious round of negotiations that dragged on for months and brought threats from MLB of severing its relationship with the National Association (now known as Minor League Baseball) and establishing a purely complex-based development system.

The two sides finally worked out a deal—which most minor league officials hated at the time—that shifted significant expenses to the minor leagues. More significantly, it established the precedent that the minor leagues would now help pay for player development.

In the years since, through renewals and amendments to the PBA, the minor leagues have paid more of their own expenses. What they have sought and received in return is an assurance that the majors will preserve their current number of affiliations.

At this point minor league teams pay just about all the expenses related to player development except for salaries and benefits for players, coaches and trainers and the cost of bats and balls. The minors also pay for umpire development and compensate the majors in the form of a ticket tax.

That's not expected to change significantly in the new PBA deal, which major and minor league officials originally expected to work out my midsummer. Minor League Baseball president Mike Moore now says the sides are shooting for Oct. 20 to have an agreement wrapped up.

Working For Good

Major and minor league officials have kept a tight lid on negotiations this year, and even though negotiators from both sides have been meeting with each other since before the season started, little information about what they're talking about has come out, even to the rank and file in the minor leagues.

"I believe both sides had (and have) a mutual goal of reaching an agreement which is good for the industry," Moore said.

What that means, exactly, isn't clear. The two sides extended the negotiation period for the PBA, which was supposed to be renewed by the end of September, after hurricanes in Florida disrupted Minor League Baseball's operations in the last couple of months.

"Both sides had other issues which took considerable time away from the process the past few months, and then the hurricanes further delayed things," Moore said. "Rather than try and rush to an agreement, we decided to give ourselves additional time to solve remaining issues."

Minor League Baseball's board of trustees met at the same time the minors held a promotional seminar in Dallas at the end of September, but people who attended the seminar were not updated on the status of PBA negotiations.

That didn't stop the rumors from flying, and the most prevalent is that the majors will pass on the cost of bats and balls to the minors, as well as an increase in the ticket tax. Bats and balls are not a major issue and just represent the continuing evolution of the minors taking on more expenses.

The ticket tax, on the other hand, could have a big impact on a minor league team's bottom line.

Taxation Without Classification

The ticket tax was born in the 1990 PBA negotiations, and in its original form it applied a sliding tax scale to the ticket sales money from teams at each classification. The original tax structure forced teams at higher classifications to pay more.

With the PBA renewal that took effect with the 1998 season, the ticket tax became a flat percentage of ticket revenue, regardless of how high the number went and regardless of classification. The rate started at 3.5 percent and gradually stepped up to the current 4.5 percent.

The change was a big hit for Triple-A teams—a team with $2 million in ticket sales paid $50,000 under the old system and now pays $90,000—and even bigger for the most successful Class A teams. Taking the same $2 million example, a Class A team's tax bill under the old system was $34,000, and now it pays the same as the Triple-A team.

Teams have adapted to the change, of course, but with talk the tax could climb significantly higher officials are worried about another jump in the steadily increasing price of doing business in the minors. "The ticket tax is a major issue, and I have concern over how high it may go," one team official said.

Rumors also persist about action on other issues, such as travel, but it seems the discussion is again coming down to money for affiliations. And as has happened every time the PBA has been renewed in the last 14 years, the minor leagues seem willing to foot more of the bill simply to preserve the status quo.

You can contact Will Lingo by sending e-mail to willlingo@baseballamerica.com.

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