Do the Rangers' New Owners Have the Money and Will to Build on a Winning Formula?
On a Sunday afternoon in July, Cliff Lee sits alone by his locker in the Texas Rangers' clubhouse. A handful of his teammates have gathered a few feet to his left around the lockers of Ian Kinsler and Michael Young, joking and chatting, but Lee, dressed in a gray Rangers T-shirt and blue workout shorts, doesn't join in. The night before, the newest Texas pitcher's locker was across the room near the entrance to the showers. Today, he's situated in the row of star players next to Nelson Cruz, Kinsler and Young.
"I just found myself over here," Lee says about his locker as Kinsler sings along with Bob Marley's "Three Little Birds," but Lee just as well could be talking about his new team.
Rumors swirled for weeks last summer that Lee would be traded by the Seattle Mariners, who had started the season with a woeful 19-31 record. Lee's contract was expiring at the end of the season, and the Mariners were ready to deal—most likely to the New York Yankees. The trade would have allowed Lee to join last year's World Series champions and reunited him with CC Sabathia, his teammate for parts of seven seasons in Cleveland.
With the Indians, Sabathia and Lee won back-to-back American League Cy Young Awards in 2007 and 2008, and the two southpaws and their wives became close friends. So when the sports grapevine reported that the defending champs had snagged Lee in exchange for a group of minor leaguers, he called his buddy to confirm. Lee says Yankees' management had been asking Sabathia questions about him, and Sabathia told him the trade was "close to happening."
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"With all the rumors and the news, yeah, it looked like it was going to happen, but it didn't," Lee says. "I'm here, so you never know what's going to happen until something's finalized."
Finding himself in a new city is old hat for Lee. The Rangers marked his fourth team in a year, and although Arlington isn't where he expected to end up, Lee appears relieved to be settled.
"I'm hoping this is the last time I have to go through this ordeal," he says the day after his first start in a Rangers' uniform against the Baltimore Orioles.
His 9-year-old son Jaxon, who survived a leukemia diagnosis as a 4-month-old when he was given only a 30 percent chance to survive, and 7-year-old daughter Maci already love it in Texas, Lee says. Arlington is "a new vacation spot" for them, and it's "closer to home in Arkansas" than any of his previous stops. But he can't say whether he'll stay in Texas for the long term.
"I'm here. I'm going to try to help this team win," he says. "We'll cross that bridge when we get there."
That bridge, for both Lee and the Rangers, is here. The team stepped onto it after Lee surrendered a three-run homer to Edgar Renteria in the seventh inning of Game 5 of the World Series. The loss ended the Rangers' season and renewed the battle between Texas and New York for the services of 32-year-old free agent Lee, who, despite two losses in the World Series against the San Francisco Giants, added to an impressive postseason résumé with dominant performances against the Tampa Bay Rays and Yankees.
Today, four months after Rangers Baseball Express LLC outbid Dallas Mavericks owner Mark Cuban and Houston businessman Jim Crane to acquire the team for $593 million in a contentious late-night bankruptcy auction, the team has a rejuvenated fan base and a wad of cash from its first World Series appearance.
The big question for fans in the offseason is: How hungry are the new owners to finally bring home a World Series championship? It took the team 39 years just to reach its first series. How long until the next one?
The answer, of course, hinges a lot on money.
Aided by the fat wallets of its investors made up of mostly local oil men—notably Ray Davis of Dallas and Bob Simpson of Fort Worth—postseason profits and a new 20-year television contract with Fox Sports Southwest that begins in 2015 and has been estimated to be worth somewhere between $1.6 billion and $3 billion, RBE has a real shot to again wrest Lee from the hands of the hated Yankees. (They're hated chiefly because the team is willing to pay whatever it costs to win. Plus, they're from, you know, New York.)
Lee's contract is only part of a pricey puzzle facing RBE. The group also must fill the gaping hole at designated hitter and possibly sign AL Most Valuable Player Josh Hamilton and starter C.J. Wilson to long-term contract extensions. RBE must also deal with the expiring contracts for team president Nolan Ryan and general manager Jon Daniels, whose artful trades landed Lee, Hamilton, AL Rookie of the Year Neftali Feliz and All-Star Elvis Andrus. (Daniels also hired Ron Washington, runner up in the AL Manager of Year voting, who received a two-year contract extension shortly after the season.)
All the pieces are in place to keep the Rangers in contention in 2011 and beyond, but exactly how RBE plans to utilize its resources is a mystery as Major League Baseball heads into its winter meetings Monday through December 9 at Walt Disney World Resort outside of Orlando, Florida, where general managers huddle with agents, players and fellow GMs aiming to improve their teams.
The Rangers' 14-member board has yet to provide a budget to Daniels, who says he's unclear about the board's approval process regarding contracts such as Lee's. Rangers chief executive officer and managing partner Chuck Greenberg says RBE has loads of confidence in Ryan and Daniels and describes the board's decision-making process on contracts as "streamlined and seamless."
Whether the board green-lights an offer big enough to keep Lee or sign any other big-name free agents (Albert Pujols, Adrian Gonzalez and Prince Fielder top next year's class), Greenberg says there are three elements necessary to succeed in sports: a burning desire to win, resources and the willingness to commit those resources.
In other words, money.
"What we went through successfully in the sale process embodies all three of those elements," he says reassuringly. "[It] is a great predictor of the way we're going to operate the franchise and should give people a tremendous source for comfort."
Setting aside talk of next season and the upcoming winter meetings for a moment, Greenberg casts his mind back to late November 2009. Previous owner Tom Hicks had put the Rangers on the block, and Greenberg, a 49-year-old sports attorney from Pittsburgh, was hustling to find investors willing to make a play for the team.
Even today, Greenberg says he can't quite explain how he talked his way into the offices and pocketbooks of a handful of North Texas' biggest names in the oil and gas industry and assembled RBE's 32-member ownership group in only a month, just beating a deadline to submit what he thought then would be the final offer for the franchise.
He compares the process to a scene from the movie Old School in which the doofus character played by Will Ferrell interrupts political consultant James Carville during a college debate to address a question about U.S. biotechnology policy. After giving a surprisingly intelligent and complex answer, Ferrell asks his teammates, "What happened?"
Despite links in the oil and gas industry among several members of RBE's owners, Greenberg claims that none of the investors he secured from October to November 2009 knew the identity of anyone else who had committed.
"At the time that the vast majority of our group came together, they were all attracted by the vision for the franchise, not by wanting to join one of their friends in making an investment," says Greenberg, owner of two minor league teams in Pennsylvania and South Carolina. "And I think that's one of the things that bodes really well for the future of the franchise."
RBE co-chairs Ray Davis and Bob Simpson, who did not respond to repeated interview requests for this story, have earned millions from the Barnett Shale—a North Texas rock formation that's one of the largest natural gas fields in the country. Davis, who co-founded Dallas-based Energy Transfer Partners L.P. in 1996 and stepped down as its co-CEO in 2007, installed pipelines for XTO Energy Inc. through ETP, which owns the largest intrastate pipeline system in Texas.
Simpson co-founded Fort Worth-based XTO Energy in 1986 and continues to serve as its chair and a consultant after it was purchased this summer for $35 billion by Exxon Mobil. According to a list published by the Wall Street Journal of the 25 highest-paid U.S. business executives from 2000 to 2009, Simpson earned $350 million in compensation as XTO's CEO during the decade and ranked No. 1 for return on investment for stakeholders.
After Simpson faced criticism from Wall Street about the large bonuses paid to XTO employees in the first ($32.2 million) and second ($37.7 million) quarters of 2004, he told stock analysts in a conference call: "Yes, we pay ourselves, and we'll continue to do it. If that's offensive, I don't know what else to do."
While everyone in RBE clearly aims to earn a profit, Greenberg has no worries that Simpson's propensity to pay himself handsomely will affect the team's payroll. "There's no reason for concern in that regard at all," he says.
High-ranking XTO officials Keith Hutton, Vaughn Vennerberg II and Brent Clum are also RBE co-owners, along with Toby Darden, chair of Fort Worth-based Quicksilver Resources Inc., an oil and natural gas exploration and production company. Co-owners Ken Hersh and Billy Quinn are both managing partners for Irving-based Natural Gas Partners, a major investment firm in the energy industry. Hersh bought ETP through NGP for $35 million in 2002 and sold it five years later for $1 billion, while Quinn has also expressed interest in purchasing the Dallas Stars.
Greenberg says he found interested investors in other states, but he determined that building a group of mostly local businessmen would make RBE's deal more appealing to Major League Baseball and give his group the best chance to succeed long term.
"This was a community that thought the Rangers existed on the other side of a moat filled with alligators and all sorts of other scary creatures," Greenberg says. "We needed to reconnect the Rangers with the community, and a great place to start would be having the ownership group actually reflect and rise from the community itself."
Greenberg refuses to discuss specific ownership percentages. Only one of the 14 board members, Bob Beaudine, doesn't have an ownership stake in the team. Beaudine's the CEO of a Plano-based sports and entertainment executive search firm that led the search to hire Bud Selig as baseball's commissioner.
Daniels met co-chairs Davis and Simpson at the board's first meeting on September 10 when he and assistant general manager Thad Levine gave a baseball operations presentation, and then he spent a lot of time with them and other co-owners throughout the postseason, where he came to know them only as baseball fans, not oil-and-gas tycoons.
"These guys were as into it as anybody," he says. "I hugged more people in October that I only had met a few months before than at any point in my life."
Ryan describes Davis and Simpson as "very competitive" and says they plan to continue building the team from within while improving the ball club through free agency and trades when possible. "I think they're very supportive no matter what we're doing, and they feel like if it makes baseball and financial sense to do something, I think they're prepared to back us on that."
Greenberg, Ryan and Daniels have expressed a desire to bring back Lee—easily the most desirable starting pitcher on the market—but at what point does his price become prohibitive? The Rangers haven't exactly had much success signing pitchers to expensive long-term contracts, with Chan Ho Park (five years, $65 million) and Kevin Millwood (five years, $60 million) as prime examples, and Lee's expected to ink a deal in the neighborhood of Sabathia's seven-year, $161 million contract signed in December 2008.
Handing out lengthy contracts to pitchers has proven to be risky business, and despite Lee's 7-2 record and 2.13 ERA in 10 starts during his incredible two-year postseason run with Philadelphia and Texas, he had a negligible effect on the Rangers during the regular season. The team won just six of his 15 starts, and he showed little consistency, surrendering a total of just nine runs in seven of his starts and 44 in the other eight. His career regular-season stats are also surprisingly similar to those of pitchers who've gone bust once they've been handed big bucks and long-term contracts.
Lee's last six seasons are nearly identical to the six of retired left-hander Denny Neagle just before he signed a five-year, $51 million contract with the Colorado Rockies, and they're on par with the six-year span of Barry Zito's career preceding the massive seven-year, $126 million deal he signed with the Giants in December 2006. Neagle's career was derailed by ligament and elbow surgeries, and Zito has been so disappointing that he wasn't included on the Giants' playoff roster this year. Daniels offers no comment when he's asked if he's hesitant to sign Lee to a long-term deal based on contracts like those signed by Zito and Mike Hampton, whose eight-year, $121 million contract with the Rockies is among the worst returns on investment in baseball history.
Even if Lee's worth an expensive long-term commitment, Ryan admits that he expects the Yankees to outbid the Rangers. "I don't think there's anyone else in the American League or maybe even the National League that feels like they're on an even playing ground with the Yankees," he says.
On November 10, three days after the Rangers' exclusive negotiating period with Lee expired and the pitcher's free agency began, Daniels' eyes are glued to his BlackBerry. Just one year older than Lee at 33, Daniels already has five seasons as a GM under his belt, during which he's developed a reputation as a risk taker and straight shooter. Inside the club's fourth-floor offices in center field at Rangers Ballpark in Arlington, Daniels ponders a question: How would he reassure fans that the Rangers will re-sign Lee rather than see him bolt to New York?
"I really couldn't tell you," he says in a defeated tone as he spins his phone on the table with his index finger. "It's not really for us to put words in his mouth. When we made the deal, our mindset had to be that we felt comfortable making the trade knowing we were getting Cliff Lee for the stretch drive and the postseason, a full year of [former Seattle pitcher] Mark Lowe, an opportunity to get around Cliff Lee and potentially an opportunity to re-sign him. And, if not, two draft picks. That's how we looked at the deal, so we were really comfortable with that, understanding one potential outcome was that he goes somewhere else."
In other words, don't rush out and buy your No. 33 jerseys.
"I don't want to come across as a defeatist," Daniels adds later, stressing that the Rangers are not making plans without Lee.
Five days after Yankees general manager Brian Cashman had lunch with Lee, his wife Kristen and agent Darek Braunecker in Little Rock for what Cashman would call a "meet and greet," Daniels, Greenberg and Ryan on November 15 made their own trip to Arkansas, where Lee purchased a restored 1927 home earlier this year and Braunecker lives and works. (Braunecker did not return phone calls seeking comment for this story.)
Greenberg describes the meeting as "terrific" but offers little else because "no good comes from talking about it a lot publicly." Ryan says Lee made it clear to them that he enjoyed his time with the Rangers. "I think what he did is assure us that he has a lot of interest in coming back to the Rangers."
Following the general managers meetings in Orlando, Ryan on November 18 told the Wall Street Journal and New York's Daily News that the Rangers weren't the frontrunners for Lee, but he downplays the comments the following day. "They didn't indicate that we had the upper hand," Ryan says. "They certainly are going to be receptive to anyone that wants to come over and visit with them, and they're prepared to go through the process. I don't think that surprised any of us."
Although the Washington Nationals have expressed interest in signing Lee and the small group of other teams with the money to afford Lee's sticker price can't be counted out, Stanford University sports economist Dr. Roger Noll says the Yankees are possibly the only team feared by the Rangers, because they're "capable of outbidding anybody."
Yet Noll claims that relatively few athletes take the highest offer and instead choose from among the top offers, selecting the one that maximizes their wealth over the long term. Unfortunately for the Rangers, that only widens the financial divide between the two clubs.
Texas does have an advantage because of its lack of a state income tax. However, Noll says because a portion of state taxes can be deducted on federal tax returns and Lee's likely to use "creative accountancy" to minimize the damage, he estimates that on a contract between $20 to $25 million per year the net tax burden would add up to around $1 million annually, which could easily be the gap between the Yankees' and Rangers' offers.
Even assuming both offers are equal, Noll says Lee stands to make millions more in endorsements by playing in a media capital. "Cliff is about to become a company," he says, and Lee will be "cashing in big time on other things than just playing baseball" if he pitches well for the Yankees.
Noll says the Yankees also offer him the best probability at winning a World Series ring. "As much as I hate it, it's true. They're always in it, and that's because they take in so much money—twice as much money as the team that's in second place."
Despite the New York's clear economic advantage, Noll says athletes consider several other factors when signing a new contract, such as their plans after retiring, coaching staffs, the weather and where they live. While it's unknown exactly what Lee's considering, the 40-minute flight to Little Rock is a clear plus for the Rangers. Will that be enough to overcome the extra cash that New York's likely to toss his way?
Tim Dierkes, founder of MLBtraderumors.com, which attracts more than a million daily page views from visitors seeking the latest scoop on signings and trades during the winter meetings, predicts that Lee's contract will be at least six years for around $23 to $25 million annually. He gives a team other than the Yankees or Rangers no more than a 10 percent chance of signing him, although he expects the Nationals to make a legitimate offer exceeding $100 million.
"If I was Lee's agent, my target would be seven years, $162 million," he says. "Then I could say that I got the biggest deal a pitcher's ever got, and I did it with a guy who's significantly older than Sabathia when he signed his contract."
If Lee does in fact sign somewhere else, Ryan says the club will adjust by signing another free agent, trading for a replacement or installing a young pitcher from within the organization into the rotation. Unfortunately, the level of talent among the free-agent pool drops off steeply after Lee. Only one upper-tier pitcher is likely to be had on the trade market, and the Rangers' best internal option doesn't appear to be ready to assume a rotation spot just yet.
With Ted Lilly, Hiroki Kuroda, Jorge De La Rosa and Jake Westbrook already re-signing with their former teams and Javier Vazquez and Jon Garland agreeing to one-year deals elsewhere, the rest of the free-agent pitchers available include Carl Pavano, Jeremy Bonderman and Brad Penny. Andy Pettitte is on the market as well, but he's likely to either retire or return to the Yankees. There's also a group of pitchers coming back from injuries that features former NL Cy Young winner Brandon Webb, Erik Bedard, Jeff Francis and Chris Young. "Whoever doesn't get Cliff Lee isn't going to find a comparable replacement on the free-agent market," Dierkes says.
Another option for the Rangers is 2009 AL Cy Young winner Zack Greinke, who recently turned 27 and has two years left on his contract. Kansas City Royals general manager Dayton Moore told the Kansas City Star on October 18 that "it's going to make sense" to trade Greinke at some point if they can't work out a contract extension.
John Manuel, co-editor in chief of Baseball America, expects the Rangers to be aggressive in their pursuit of Greinke, although a trade for him could deplete Texas' farm system. "[The Rangers are] relevant, and I think they like the idea of being relevant, and I would too. I think they'll do what they need to do to be relevant, and you can rebuild a farm system easier than you can rebuild a major league team."
Daniels says closer Neftali Feliz will be stretched out during spring training much like he was this year in an attempt to see if he's ready to step into the starting rotation because "he's got too good of an arm and stuff not to think about it." But he questions whether the timing is right for the 22-year-old Dominican flamethrower, and Ryan takes it one step further, flatly saying "no" to whether Feliz's immediate future is as a starter.
Manuel says Feliz's 100-mph heater is good enough to pitch in the rotation at some point, but Joba Chamberlain of the Yankees is a prime example of a young pitcher who suffered because of the club's inability to commit him to the bullpen or rotation.
Although Daniels admits retaining Lee demands much of his focus and time, he signed 32-year-old catcher Yorvit Torrealba to a two-year, $6.25 million contract to replace free agent Bengie Molina and says filling the club's vacancy at designated hitter created by the expired contract of Vladimir Guerrero is a top priority. Guerrero, who had just one hit in 14 World Series at-bats after a strong comeback campaign this year, could return but is seeking a long-term contract. There are several players suited for the DH role that Texas could grab cheaply if Guerrero heads elsewhere.
Texas also has several key players nearing free agency themselves, with Wilson free at the end of next year, followed by Hamilton in '12 and Cruz in '13. Hamilton poses a significant risk when he enters free agency at 31 years old, as he'll be seeking a record long-term deal similar to Lee's. Despite his status as one of the game's premier offensive and defensive players, he's struggled to stay healthy, and the postseason celebrations using ginger ale instead of Champagne staged solely for Hamilton are a sobering reminder of his past struggles with alcohol and drugs. Ryan says signing them to long-term deals hasn't been discussed yet because of the postseason, owners meetings and GMs meetings, and he won't comment about any specific player. Daniels stresses that any such move would have to be a good business decision, and he too refuses to express particular interest in signing any of the three players to lengthy contracts.
"When we talk about the core of this club being here for a long time, I think part of that's an obligation on the part of the organization to back that up and try to keep the players here, so that will be something we look at this winter," he says.
Despite the achievements of Ryan and Daniels, who have the board's "utmost trust and confidence," according to Greenberg, their contracts also expire at the end of the upcoming season, though both are confident that new deals are a mere formality. Ryan, who turns 64 in January, says he has no plans to step down as team president any time soon.
"At some point in time, if I feel that I'm not enjoying what I'm doing, then I might consider a different role or taking a lesser role," he says. "But right now I'm very enthused about what's happening and enjoy what I'm doing and the challenges of what I'm doing."
Although Ryan hasn't discussed an extension with him yet, Daniels isn't reading anything into it and expects to be approached at some point. "If something works out, great. If not, I've got a contract for next year," he says. "I'm not one of these guys who gets too hung up about that. Not to be arrogant, but I'm pretty confident about what we're doing."
Whether or not the Rangers can keep Lee away from the Yankees for a second time, Ryan says the club's payroll will "increase substantially" from the $55 million spent last year—the fourth lowest in baseball. With no clear staff ace among the remaining crop of free-agent pitchers, the team's likely to shift its attention to Texas natives Carl Crawford and Adam Dunn. Signing the speedy Crawford would not only solidify the Rangers' outfield as the best in baseball, but it would prevent him from landing in the hands of AL West rival the Los Angeles Angels of Anaheim—a club with money to spend and an interest in the 29-year-old. Dunn would add one of the game's top power hitters to the lineup and fill the hole at DH, while playing occasionally in the outfield and at first base.
Any signings would need to be balanced with retaining Wilson, Hamilton and Cruz long term and the knowledge that inking any one player to a pricey deal could cripple the club. After all, it was the Rangers' signing of Alex Rodriguez to a 10-year, $252 million contract in 2000 that contributed to the team's financial woes, leading to the decision to trade him to the Yankees in 2004 and eat a chunk of his salary for the privilege.
The Rodriguez contract turned out to be the biggest gaffe during the tenure of Tom Hicks as owner, especially when Rodriguez in February 2009 admitted to taking performance-enhancing drugs during his three-year stint in Texas. But Ryan is quick to praise Hicks for this year's success, meaning new ownership must find a way to distinguish itself from him to make its own mark on the franchise. "I give Tom Hicks a lot of credit because if you look at that ball club, it was his club," he says. "He put some people in the positions that they were in, and he allowed us to do things and was supportive. It just happened to be that a set of circumstances came together that put him in a position that he couldn't continue, so I think he should get a lot of credit."
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