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Rule 52 Clarification01/12/2010 4:30 PM ET
To all of our Fans,
Many of you have called me over the past few weeks understandably confused by recent events regarding the long term status of the San Jose Giants if a new downtown stadium is built for the Oakland A's. Recent stories have suggested that if the new stadium is built, it will not affect our ability to stay in San Jose. You have asked me to clarify this point based on the actual process that would be used in determining whether we would stay or go.
There are two major issues that would have to be considered prior to any determination on whether the San Jose Giants would be forced to relocate in the event a new stadium was built.
The first is the process defined by "Rule 52", which is part of our agreement between Minor League and Major League Baseball. Rule 52 governs the terms and conditions by which a Major League Club may acquire the territorial rights of a Minor League team. I have posted the entire section on our website so that everyone can read it for themselves and understand the complex nature of this transaction.
In essence, pursuant to Rule 52, a Major League team wishing to relocate within a 15 mile radius of an existing Minor League club must acquire those rights through a formal notification to the team, the California League and the National Association of their intent to "draft" the territory.
The Major League Club must compensate the Minor League Club for the value of that territory based on a formula. The Major League Club, at their option, can require the Minor League team to relocate or can consent to allow that team to continue operations under present conditions. The amount of compensation due the Minor League Club, California League and the National Association is impacted significantly by the decision to relocate or to stay but under either option the Major League Club must still compensate all parties in drafting the territory.
Recent examples of these transactions include Miami, Denver and Phoenix. In these cases, the Minor League teams were forced to relocate away from their historic homes. Economics factored heavily in the decision. And these economics represent the second major issue that must be considered regarding staying or relocating the team.
Although the fan base between our team and the A's is substantially different, the real competition falls into the corporate sponsorship arena. Ticket sales generally represent 35% to 50% of total operating revenues of a Minor League Club in a major city; corporate sponsorships can represent as much as 40% of the total operating revenues. Given today's economic environment, corporate sponsorships have declined and the competition for those dollars are at an all time high. The new stadium competing for the same corporate funding with the existing sports teams would have a serious negative impact on the region. Most professional sports managers understand that the "new" building will draw away corporate dollars from their operation causing significant shortfalls. We are not in an economic environment that would support companies doubling their sponsorships dollars; it is just not going to happen.
Our organization won't be the only one to feel the negative impact, other facilities in the area such as the HP Pavilion may lose significant corporate funding, forcing additional taxpayer dollars to cover potential shortfalls in that City facility.
It is worth noting that in this time period of limited resources a decline in the corporate support of the San Jose Giants or teams relying upon HP Pavilion could potentially impact the public, as both Municipal Stadium and HP Pavilion have received significant public investments. The taxpayers' return on its investment could be impacted if you end up taking corporate money from one facility to be put into another facility.
Although there are many variables that could change over the next few years, the probability that the San Jose Giants could sustain our business operation three miles from a new MLB stadium is highly unlikely.
We have great respect for the people of San Jose and recognize that the question of whether or not to bring in a Major League Baseball Club is a complex issue. The San Jose Giants will continue to do its best to put out the facts, engage in a civil discussion and inform our team's fans and supporters of the challenges to our Club posed by the relocation of a Major League Baseball Club to San Jose.
I want to thank you for your continued support of the San Jose Giants and I look forward to seeing you at the ballpark.
This story was not subject to the approval of the National Association of Professional Baseball Leagues or its clubs.