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Tax Bill Could Raise Sports Teams' Value

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  • Tax Bill Could Raise Sports Teams' Value

    Mon Aug 2, 3:48 PM ET Add Politics - U. S. Congress to My Yahoo!

    By ALAN FRAM, Associated Press Writer

    WASHINGTON - Many professional sports teams could increase in value by millions of dollars under a provision Congress included in legislation revamping corporate tax laws, tax and sports finance analysts said Monday.

    The exact impact of the language would vary for each franchise. Minor league teams in faltering financial health could lose money because their tax deductions might be worth less under the new rules than under current law, the analysts said.

    Profitable franchises could find their values enhanced by many millions of dollars because under the proposed legislation, they would be able to write off far more in taxes than they can today when they sell their teams.

    "At the end of the day, there is no doubt it raises franchise values," said Robert Willens, a managing director of the investment bank Lehman Brothers.

    Willens said the provision could add 5 percent to the value of many sports teams. Aaron Barman, who heads the sports finance group of Raymond James & Associates, said profitable National Football League teams could see their value rise by 5 to 6 percent.

    "It's going to vary widely depending on the particular sport," Barman said. "But generally speaking, the proposed legislation should be a positive" to many teams' values.

    The language has been inserted into other bills in recent years but never enacted. Major league baseball has been among the strongest advocates lobbying for the change, congressional aides said.

    In 2002, Forbes magazine estimated that American major sports franchises totaled $41 billion in value. A 5 percent increase would mean a $2 billion boost in their cumulative value.

    In April, the magazine estimated that the New York Yankees are worth $832 million. The lowest-valued team, the Montreal Expos, is worth $145 million, the magazine estimated.

    The language would let owners deduct the entire value of their sports franchises including broadcasting contracts, players' contracts and concessions from their income taxes over a 15-year period.

    Under current law, only players' contracts can be written off, but only up to half a franchise's value and only for the duration of those contracts, generally just a few years.

    The provision is in both House and Senate versions of a bill aimed at ending corporate tax breaks that international trade courts have ruled is an illegal export subsidy for U.S. companies.

    The sweeping bills have become laden with tax provisions for many specific industries. The two chambers hope to approve a compromise version of the measure and send it to President Bush (news - web sites) after lawmakers return from their summer break in September. Because the sports language is in both bills, it probably will be in the compromise.

    The language was included by the bills' authors, Senate Finance Committee Chairman Charles Grassley, R-Iowa, and House Ways and Means Committee Chairman Bill Thomas, R-Calif.

    Congress' Joint Tax Committee, which is the official analyst of tax legislation for lawmakers, says the provision would raise $382 million for the government over the next decade.

    It was included because "it's the right policy choice" and because lawmakers "were looking to bring down the overall cost of the legislation," said Christin Tinsworth, Thomas' spokeswoman.

    Lehman Brothers' Willens said, however, the language would lose money over the longer run because the tax written off by teams eventually would exceed deductions they would be entitled to under current law.

    After many years of uncertainty and battling between taxpayers and in the Internal Revenue Service (news - web sites), tax laws were rewritten in 1993 to let companies write off intangible property, such as copyrights, over 15 years.

    Sports teams were exempted from that law and have faced continued disputes over their tax liabilities. The current legislation would end that exemption.

Related Topics


  • Nick
    Jaguars are $110 million in debt
    by Nick
    Jaguars seek ways to tackle debt
    The Times-Union
    March 9, 2007

    The Jacksonville Jaguars, facing the financial squeeze of being a small-market team coping with rising player costs, have hired a New York investment-banking firm to find ways to restructure or reduce their $110 million debt, the Times-Union has learned.

    One of the options being pursued by Galatioto Sports Partners is to find limited partners willing to invest in the team so the money could be used to pay down the debt.

    Another option is to restructure the bonds to reduce the interest payments. Bill Prescott, the team's senior vice president and chief financial officer, said the current rate is "north of 7 percent.''

    The Jaguars, who lost money last year, need to reduce debt in order to become profitable and to field a competitive team.

    Jaguars owner Wayne Weaver stressed that one option not being considered is selling the team.

    "Just listen to me carefully,'' Weaver said. "I am not selling the team. If and when I'm going to sell, I promise the city will know it first.''

    Weaver said Sal Galatioto, the president of Galatioto Sports Partners, found a potential buyer for the majority interest of the team, but the Jaguars owner rejected the offer.

    "I said no. I'm not selling,'' Weaver said.

    Prescott said Weaver gets inquires about selling a majority interest in the team several times a year and the answer is always the same: the team isn't for sale.

    Galatioto has put together a 104-page book, including the team's audited financial figures and the team's lease, to present to potential limited investors.

    Prescott said reducing the debt service is one of several cost-cutting options being considered by the team in the wake of the new collective-bargaining agreement that has resulted in the team spending at least 65 percent of its gross revenue on player costs even though the mandated leaguewide average is close to 57.5 percent.

    "We've got 35 percent [of revenue] to pay operating costs, overhead and debt service. Debt service is a fixed cost, so this is an effort to explore options to reduce that cost in order to help the team be profitable,'' Prescott said.

    Get rid of broadcasters?

    Prescott said another option is to eliminate the team's in-house broadcast department and have local TV and radio stations produce the shows.

    That could save the team up to $1 million because under the new collective-bargaining agreement, the players get a percentage of the gross revenue without sharing any of the costs. The Jaguars wouldn't have any expenses if the stations produced the shows and then paid a fee to the team or shared sponsor revenue.

    "We're looking at everything, including concessions and ticketing,...
    -03-11-2007, 11:43 AM
  • psycho9985
    Tragic and UnAmerican B.S.
    by psycho9985
    IOC president Jacques Rogge (search) said baseball and softball, two sports invented in America, would be eligible to win their way back into the Olympics for 2016.

    Baseball and softball, which will remain on the program for the 2008 Beijing Games, are the first sports eliminated from the Olympics since polo in 1936.

    "I think they've made a big, big mistake," said Tom Lasorda, the former Dodgers manager who guided the U.S. team to the gold medal in the 2000 Sydney Games. "Baseball is played by all countries now, and softball, too. I think that's really going to hurt the Olympics."

    Bob DuPuy, the major leagues' chief operating officer, said the IOC's decision will "adversely affect millions of sports fans worldwide."

    With two slots open on the program, the IOC voted from a waiting list of five sports: golf, rugby, squash, karate and roller sports. Squash and karate were nominated but rejected overwhelmingly, failing to get two-thirds approval.

    Dropping baseball and softball will remove 16 teams and more than 300 athletes from the Olympics.

    Baseball, which became a medal sport in 1992, has been vulnerable because of steroids in the major leagues and the absence of major leaguers from the Olympics. Softball, a women's only medal sport since 1996 won all three times by the United States, has been in danger because of its association with baseball and a perceived lack of global appeal and participation.

    "The lack of the MLB players I think people have looked and said, `Well, all right, if there's to be a change, that seems to be the logic of it,"' British IOC member Craig Reedie said.

    Among the players who competed in the Olympics before starring in the majors are Jason Giambi, Jason Varitek, Nomar Garciaparra and Ben Sheets.

    Major League Baseball has toughened its drug-testing programs, but they still fall far short of Olympic standards.

    "Problems with doping in U.S. baseball probably cost the sport dearly," Australian IOC member John Coates said.

    Several IOC members also cited high stadium costs associated with both sports, saying baseball and softball venues have little use in some host cities after the games.

    "I feel like somebody who has been thrown out it's certainly not a good feeling," said Aldo Notari, the Italian president of the International Baseball Federation. "I don't think the IOC members know our sport deeply enough."

    Don Porter, the American president of the international softball federation, said his sport's ties to baseball created problems.

    "We tried to keep our distance," he said. "But I think there's still too many people think we're part of baseball. We're absolutely not."

    Cuba has won three of the four gold medals since baseball was first played...
    -07-08-2005, 10:22 PM
  • RamsFan16
    Rams added to NFL's revenue-sharing committee
    by RamsFan16

    Rams one of five teams added to revenue-sharing committee
    By John Wawrow

    BUFFALO, N.Y. (AP) -- NFL commissioner Paul Tagliabue added five teams to a committee that will help determine how a new revenue-sharing plan -- important to small-market franchises' economic stability -- will work under the league's new labor deal.

    Tagliabue appointed Houston, Green Bay, Cleveland, Detroit and St. Louis to the committee in a memo issued around the NFL on Monday, league spokesman Greg Aiello said Tuesday. Aiello said two more teams, representing the league's lower-revenue franchises, will be added soon to complete the eight-member committee.

    Buffalo was the first team appointed last week after Bills owner Ralph Wilson complained the new collective bargaining agreement reached last month, which added a new revenue sharing model, threatens the financial viability of his and other small-market teams.

    Wilson's concerns Sen. Charles Schumer (D, N.Y.) to meet last week with Tagliabue, who expressed reassurances that the new labor deal would not hurt or force small-market teams to relocate.

    Schumer was pleased with the additional teams selected to the committee.

    "It appears that the overall makeup of the committee will be sympathetic to small markets," Schumer said in an e-mail sent to The Associated Press. "This is another big step in our crusade to keep the Bills in Buffalo."

    The committee will be split evenly among the league's higher- and lower-revenue teams. Houston, Green Bay, Cleveland and Detroit each had revenue above the league average over the last few seasons. Buffalo and St. Louis represent the bottom fourth revenue-generating franchises.

    The committee will recommend how supplemental revenue-sharing money will be distributed. The recommendations must be passed by at least 24 of the league's 32 owners. If not approved by owners, the commissioner has the authority to make the final determination.
    -04-25-2006, 06:59 PM
  • DJRamFan
    Owner puts Firebirds up for sale
    by DJRamFan
    Arena football team may move if local buyer can't be found

    By Jeff Rabjohns
    [email protected]
    July 30, 2004

    The Indiana Firebirds are for sale and may move to Florida if a local buyer cannot be found in the next 30 days, owner David Lageschulte said Thursday.

    Lageschulte is searching for local ownership for the Arena Football League franchise that moved to Indianapolis from Albany, N.Y., before the 2001 season.

    If that doesn't happen, Lageschulte, a resident of Fort Myers, Fla., said he would look to move the team, possibly as soon as next season.

    "I would like that to be an option," he said. "First, I'd love to try to sell it and keep it in Indiana. We have wonderful crowds and wonderful games in Indiana.

    "If I can't, I would try to move it. Florida would be a choice of mine, but that would have to come with league approval."

    Lageschulte declined to tell his asking price for the team or what he paid for it. The most recent team to join the Arena league, the Austin (Texas) Wranglers, paid a $16.2 million expansion fee before the 2004 season. The sale of the Georgia Force before the 2003 season was reported at $14 million.

    With an influx of NFL ownership and a television deal with NBC, Arena football has seen its franchise values soar.

    "It's probably a little early to tell what the market will bear," said David Morton of Sunrise Sports Group, who along with Milt Thompson of Grand Slam III has been contracted by Lageschulte to search for potential owners.

    "To compare a new franchise . . . is difficult because this is an existing, established brand."

    Morton said he and Thompson are in the early stages of making proposals to potential buyers.

    Lageschulte purchased the team in August 2002 from Glenn Mazula, who owned the team since its inception in 1990.

    Lageschulte was an investor in the franchise since 1997. From 1993-95, he also owned an Arena franchise known as the Miami Hooters.

    One of the originators of the Hooters restaurant chain, Lageschulte is co-CEO of a company that runs 30 restaurants and bars. He also is part owner of a company involved in fitness centers, heavy equipment and environmental remediation.

    Lageschulte purchased control of the Firebirds with the intent that he would eventually sell the team.

    "We have some pretty stiff deadlines at this point. I love Indianapolis and the Indianapolis market," Lageschulte said. "Unfortunately, I live in Florida and that's the reason I wanted to sell the team or have someone take it over.

    "We have to find something in the next 30 days that at least smells like a deal."

    Playing in Conseco Fieldhouse, the Firebirds averaged...
    -08-02-2004, 03:59 PM
  • DJRamFan
    NCAA president concerned about schools' rate of spending
    by DJRamFan
    Jan. 8, 2005 wire reports

    GRAPEVINE, Texas -- With big steps already being taken toward academic reform in college athletics, NCAA president Myles Brand believes the next area of concern is containing costs.


    In his state of the NCAA speech on Saturday, Brand expressed concern about ever-increasing athletic budgets. He warned that similar rates of growth, pushed recently by big TV contracts and other "fast-flowing new revenue streams," are unlikely in the future.

    "There will be disappointments when the rate of growth moderates," Brand said.

    Winning programs won't necessarily escape that trend.

    Brand pointed to an economic study released by the NCAA a year ago that found no correlation between increased spending and increased winning, or between increased winning and increased revenues.

    The need to increase the rate at which revenue expands has also inflated the need to increase wins, Brand said. That has raised the competition for outstanding student-athletes and coaches, some who have $2 million annual contracts.

    "We must arrest the slide toward professional athletics and the sports entertainment industry," Brand said. "And while the problem is not of crisis proportions right now, the time to (address the problem) is now."

    The average Division I university spends almost $15 million a year on athletics. That increases to about $27 million for schools with Division I-A football.

    Brand said the problem of "spiraling expectations" isn't directed only at Division I-A programs.

    "The same process has driven some I-AA programs to moves its football to I-A and some Division II programs to seek the visibility of Division I," he said.

    Some schools feel that moving "to the next level" will result in enhanced academic reputation or new institutional revenue streams, or both.

    While containing costs dominated his speech, Brand also discussed academic reform, a centerpiece of his plan since becoming the NCAA's leader two years ago, and the status of amateurism in college sports.

    Brand also called it "simply appalling" that there are so few black head football coaches in Division I, as well as Divisions II and III, and not enough women in high positions such as head coaches and athletic directors.

    Under a plan being finalized this weekend by a committee and expected to be approved Monday by the Division I Board of Directors, schools will face scholarship reductions for poor academic performance by teams.


    The Division I Committee on Academic Performance hoped to determine the final standards for the program on Sunday.

    -01-10-2005, 07:24 AM