SOM graduate offers insider perspective on Yankee finances
By Steve Seepersaud
When Scott Krug '96 mentioned the figure of $189 million to a crowd of more than 100 Binghamton University alumni, it was evident from the chatter in the room that the group had been paying attention to ESPN or New York-area newspapers.
A total player payroll beneath that much-reported figure would have enabled the New York Yankees to realize some cost savings according to a set of regulations that Krug said has become more contentious than the age-old money battles between players and owners.
Krug, who serves as the Yankees' chief financial officer and vice president of financial operations, discussed the issues affecting the team's bottom line at the School of Management's alumni networking event held March 20 at the New York Athletic Club in Manhattan.
Among the owners of Major League Baseball, the Yankees are an easy target for vitriol — a successful team playing in the nation's largest media market with a seemingly unlimited supply of money. In an effort to level the playing field, the league instituted revenue sharing to take from the rich (larger market teams) and give to the poor (smaller market franchises).
"It actually turned out to be high-revenue teams versus low-revenue teams," Krug said. "Look at Washington, Toronto, Houston and Atlanta. Those are big markets but the teams have lower revenues. Those teams have been historically on the receiving end of revenue sharing. That's not what was intended."
The Yankees' revenue sharing payouts have increased exponentially since its implementation nearly 20 years ago. Krug implied the team paid roughly $135 million in 2009, which stands in stark contrast to the $24 million that all the big-market teams paid collectively in 1996.
Under baseball's collective bargaining agreement, teams in the 15 largest markets are now ineligible to benefit from revenue sharing. Krug said that's important because money can be returned to the payors instead of going into the coffers of teams that had previously been receiving funds.
"So, as the largest payor, we can get the most money back," he said. "The catch is that we have to stay under the $189 million."
Although the Bronx Bombers opted not to grant a big contract to veteran second baseman Robinson Cano (he signed a 10-year, $240 million deal in Seattle), they still crossed the luxury tax threshold and will have a payroll closer to $200 million. The Yankees could have qualified for more favorable luxury tax rates had they stayed south of $189 million.
"I told Hal Steinbrenner [Yankees managing general partner], 'I'd like you to go under. But, if you're not going to get under, then feel free to spend as much as you want. Whatever you do, just don't go over by only a dollar, because that doesn't help.' Unfortunately, that was the advice that he took," Krug said, drawing laughter from the crowd.
Dean Upinder Dhillon thanked alumni for their continued engagement with the school and their creation of opportunities for current students.
"Our seniors have seen a significant increase in the amount of jobs available to them," Dhillon said. "That's possible because of you. Of course, through your networking you create opportunities for yourselves as well. We want to provide you with more events like this. We're trying to expand our strategic reach into this area."
Gary Kibel '90, MBA '92, a School of Management graduate, provided welcoming remarks on behalf of the Alumni Association.
"I strongly encourage you to stay connected to the University," said Kibel, who is a member of the Association's board. "As you're out in the world, and you meet other people who went to Binghamton, encourage them to stay connected too."
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