Kevin
Krause showed last week that he knows how to orchestrate good drama,
and that he has a decent sense of humor. Not since Boston Red Sox
General Manager Theo Epstein made his escape in a gorilla suit last
Halloween has a simian played such a major role in baseball
shenanigans.
When Krause, president and general manager of the Swing of the Quad Cities, sent in the team’s mascot to deliver a check for $367,000 to Mayor Ed Winborn, he knew that the absurdity of the situation would make people forget some of the serious issues that had been raised recently.
Combined with a payment by Krause earlier in the week of roughly $50,000, the check from Clyde the orangutan meant that the Swing had paid off $415,241 in John O’Donnell Stadium construction costs that the City of Davenport claimed the team owed the municipality. City officials set a deadline of May 3 for payment, and Clyde delivered just under the wire. The city could have – and threatened to – lock out the Swing if the team failed to pay.
Krause turned the situation into a joke, but the context of this little piece of political theatre suggests a much less rosy situation. I’m guessing plenty of people in city government and the community would have liked to see Krause default on the payment and be forced to sell the team.
Consider, most importantly, the sale offer made by Raccoon Baseball Incorporated (RBI) of Des Moines. The company, owner of the Iowa Cubs and chaired by political heavyweight Michael Gartner – the former head of the Vision Iowa program – offered a package of $7 million to buy the Swing. Krause rejected the offer earlier this week, but it’s worth exploring for what it says about the state of baseball in the Quad Cities.
On the surface, RBI’s proposal sounds like a more-than-fair price.
But RBI offered a raw deal to Krause, and it suggests that the Swing is in financial trouble. Just as importantly, the city’s willingness to consider taking less than 20 percent of the Swing’s current rent says that Krause’s departure would have been welcome.
Even RBI’s proposal letter opened with a thinly veiled dig at Krause: “We appreciate the opportunity you gave us on April 14 to meet jointly to discuss how to restore pride and profitability for professional baseball in Davenport so it can remain a community asset for many years ahead.” (Emphasis added.)
Under the terms of the proposal sent by RBI on April 25, a majority of the sale price would be used to retire the Swing’s debt to the city. RBI would have paid the city a deposit of roughly $450,000 to cover the team’s current construction-cost obligations and committed to paying the city an additional $1 million over 20 years. The team would then pay $5.5 million at closing – split between the city and the Swing’s current owners – for a total deal value of $7 million.
Based on the city’s estimates, the Swing’s debt to the city is just over $4.8 million for the renovation of John O’Donnell Stadium. In other words, the amount of money that Krause would net from any deal with RBI would have been in the neighborhood of $2.2 million.
That’s a low-ball offer designed for someone who needs the money. RBI was betting that the team was in desperate enough financial straits that its ownership would accept whatever money it was given, because the alternative was to get locked out of its own stadium.
In 2001, Krause agreed to sell the baseball organization to Kip Horsburgh of Gates Mills, Ohio. That sale would have netted the owners of the Quad Cities team $5 million, but it eventually fell through.
The proposal from RBI would have brought in less than half that, and likely less than Krause paid for the team when he bought it in 1998. Single-A teams such as the Swing generally have a value between $2.5 million and $7 million apiece. Three other Midwest League teams have been sold in recent months, each for between $6 million and $7 million, Krause has said.
So in the end Krause came up with the money he needed to keep the team and rejected the RBI offer. But I get the sense that city leaders would be willing to take a hit to be done with him.
Consider, for instance, that the city was willing to listen to a proposal that would have reduced the team’s annual rent from $102,000 (what Krause currently pays) to $16,500. Over the course of a 20-year lease restructuring proposed by RBI, that would represent a $1.7-million loss in income to the city – assuming the team under Krause would have stayed beyond its current 15-year lease (signed in 2002) and would have continued to pay the same amount of money annually.
The trade-off is that a greater portion of construction debt would be paid off more quickly, but that in itself doesn’t justify giving up nearly $2 million in lease payments.
City Administrator Craig Malin, in a conversation prior to Krause paying on the construction debt, said that RBI’s proposal had some attractive elements – a “quality” baseball operator (his word), the retirement of construction debt, and a longer-term commitment. “I think the pre-proposal is a very good starting point,” he said.
He stressed that a lot of details would still need to be worked out – such as city use of the facility (which the RBI proposal would have prohibited), who would pay for water (the proposal said the city would), and naming-rights revenue (which the proposal said should belong to RBI).
But Malin said the city might be willing to take significantly less lease money. “We need to view the facility as one of a number of downtown business generators,” he said. “The city does not need to make money through the rent payment itself. We don’t want to lose money, obviously.” He added that the city’s costs related to John O’Donnell presently are limited to garbage collection – roughly $15,000 to $20,000 annually.
The idea that the city would even entertain the RBI proposal sends a clear message: The value of a dollar from Kevin Krause is worth far less than a dollar from RBI.
Of course, I doubt RBI would have some guy in a monkey suit deliver its checks.
When Krause, president and general manager of the Swing of the Quad Cities, sent in the team’s mascot to deliver a check for $367,000 to Mayor Ed Winborn, he knew that the absurdity of the situation would make people forget some of the serious issues that had been raised recently.
Combined with a payment by Krause earlier in the week of roughly $50,000, the check from Clyde the orangutan meant that the Swing had paid off $415,241 in John O’Donnell Stadium construction costs that the City of Davenport claimed the team owed the municipality. City officials set a deadline of May 3 for payment, and Clyde delivered just under the wire. The city could have – and threatened to – lock out the Swing if the team failed to pay.
Krause turned the situation into a joke, but the context of this little piece of political theatre suggests a much less rosy situation. I’m guessing plenty of people in city government and the community would have liked to see Krause default on the payment and be forced to sell the team.
Consider, most importantly, the sale offer made by Raccoon Baseball Incorporated (RBI) of Des Moines. The company, owner of the Iowa Cubs and chaired by political heavyweight Michael Gartner – the former head of the Vision Iowa program – offered a package of $7 million to buy the Swing. Krause rejected the offer earlier this week, but it’s worth exploring for what it says about the state of baseball in the Quad Cities.
On the surface, RBI’s proposal sounds like a more-than-fair price.
But RBI offered a raw deal to Krause, and it suggests that the Swing is in financial trouble. Just as importantly, the city’s willingness to consider taking less than 20 percent of the Swing’s current rent says that Krause’s departure would have been welcome.
Even RBI’s proposal letter opened with a thinly veiled dig at Krause: “We appreciate the opportunity you gave us on April 14 to meet jointly to discuss how to restore pride and profitability for professional baseball in Davenport so it can remain a community asset for many years ahead.” (Emphasis added.)
Under the terms of the proposal sent by RBI on April 25, a majority of the sale price would be used to retire the Swing’s debt to the city. RBI would have paid the city a deposit of roughly $450,000 to cover the team’s current construction-cost obligations and committed to paying the city an additional $1 million over 20 years. The team would then pay $5.5 million at closing – split between the city and the Swing’s current owners – for a total deal value of $7 million.
Based on the city’s estimates, the Swing’s debt to the city is just over $4.8 million for the renovation of John O’Donnell Stadium. In other words, the amount of money that Krause would net from any deal with RBI would have been in the neighborhood of $2.2 million.
That’s a low-ball offer designed for someone who needs the money. RBI was betting that the team was in desperate enough financial straits that its ownership would accept whatever money it was given, because the alternative was to get locked out of its own stadium.
In 2001, Krause agreed to sell the baseball organization to Kip Horsburgh of Gates Mills, Ohio. That sale would have netted the owners of the Quad Cities team $5 million, but it eventually fell through.
The proposal from RBI would have brought in less than half that, and likely less than Krause paid for the team when he bought it in 1998. Single-A teams such as the Swing generally have a value between $2.5 million and $7 million apiece. Three other Midwest League teams have been sold in recent months, each for between $6 million and $7 million, Krause has said.
So in the end Krause came up with the money he needed to keep the team and rejected the RBI offer. But I get the sense that city leaders would be willing to take a hit to be done with him.
Consider, for instance, that the city was willing to listen to a proposal that would have reduced the team’s annual rent from $102,000 (what Krause currently pays) to $16,500. Over the course of a 20-year lease restructuring proposed by RBI, that would represent a $1.7-million loss in income to the city – assuming the team under Krause would have stayed beyond its current 15-year lease (signed in 2002) and would have continued to pay the same amount of money annually.
The trade-off is that a greater portion of construction debt would be paid off more quickly, but that in itself doesn’t justify giving up nearly $2 million in lease payments.
City Administrator Craig Malin, in a conversation prior to Krause paying on the construction debt, said that RBI’s proposal had some attractive elements – a “quality” baseball operator (his word), the retirement of construction debt, and a longer-term commitment. “I think the pre-proposal is a very good starting point,” he said.
He stressed that a lot of details would still need to be worked out – such as city use of the facility (which the RBI proposal would have prohibited), who would pay for water (the proposal said the city would), and naming-rights revenue (which the proposal said should belong to RBI).
But Malin said the city might be willing to take significantly less lease money. “We need to view the facility as one of a number of downtown business generators,” he said. “The city does not need to make money through the rent payment itself. We don’t want to lose money, obviously.” He added that the city’s costs related to John O’Donnell presently are limited to garbage collection – roughly $15,000 to $20,000 annually.
The idea that the city would even entertain the RBI proposal sends a clear message: The value of a dollar from Kevin Krause is worth far less than a dollar from RBI.
Of course, I doubt RBI would have some guy in a monkey suit deliver its checks.
