The Los Angeles Dodgers may be in a bit of trouble due to their spending the past few years. This is a mandate from Major League Baseball to reduce their debt in large amounts.
Having spent nearly $300 million in 2015, it is expected that they will be reducing their payroll by $100 million to $200 million in 2018.
The team said to the LA Times that the reductions are unrelated to baseball’s rules about debt.
“Which demand clubs be in compliance within five years of an ownership change, the Dodgers say they spent heavily in the early days of Guggenheim ownership in order to be competitive as they rebuilt the organization’s player development program and infrastructure.”
MLB commissioner Rob Manfred said that the Dodgers don’t have anything to worry about in regard to ownership.
“I think the Dodgers will be in a position that they can comply with our expectations in terms of the debt service rule, without any dramatic alteration in the kind of product they have been putting on the field”
While in practice, they shouldn’t have anything to worry about, reducing a payroll by almost 1/3 is an awful lot.
The league’s debt rule is to ensure teams have the resources to meet their financial goals and limits debt to no more than 12 times annual revenue, minus expenses.
According to co-owner Todd Boehly, in the first three seasons under new ownership, the Dodgers have not been profitable. The debt is assumed to be somewhere in the hundreds of millions. If this isn’t a big deal to the league, they have truly turned the other way. Such a debt-riddled team should cause concern especially for Major League Baseball.
[LA Times]
