CelticsStrong
Around the League => Around the NBA => Topic started by: Roy H. on July 17, 2017, 05:50:23 PM
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Adam Wexler: #Rockets @tadbbrown announces owner Leslie Alexander is putting the team up for sale via Twitter awexlerKPRC
Jonathan Feigen: Forbes in February put a valuation on the Rockets at $1.65 billion. Alexander bought the team in 1993 for $85 million. via Twitter Jonathan_Feigen
Zach Lowe: People have been wondering which owner/group would cash out first after dramatic rise in team valuations over past 5-6 years. via Twitter ZachLowe_NBA
Micah Adams: Adjusted for inflation, Alexander bought Rockets for $144M. If it sells for $2.9B (plausible), hell have a 20-fold return on investment. via Twitter MicahAdams13
We hear it constantly: owners shouldn't be expected to "lose" tens of millions of dollars on payroll. Dan Gilbert allegedly "lost" money during the Cavs championship season.
Nonsense. Beyond the fuzzy math of accounting in professional sports, there's the issue of the appreciation of franchise values. Leslie Alexander is going to make a $2 billion profit. Dan Gilbert has made several hundred million dollars off of Lebron. If a team refuses to pay tax, it's highly unlikely its due to financial hardship.
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If an owner doesn't plan to sell, a valuation isn't helping him that much. And there's no guarantee they can sell their team for a Forbes valuation, no guarantee the value will stay high, and no way to regain luxury tax paid if they aren't selling. These are successful business men, not fans playing with monopoly $$$.
Gilbert's team's value will decline when Lebron leaves. Would be stupid of him to pile more $$ into a team that won't be good enough.
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It's a cash flow issue as well. The estimated value of the team is all well and good, but it is not cash in had. The lux tax has to be paid in cash out of the owners pockets. The Celts owners are millionaires not billionaires and that is real money to them, it's not reasonable to expect owners to pay lux tax unless the players they are retaining are putting the team at a championship level.
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It's a cash flow issue as well. The estimated value of the team is all well and good, but it is not cash in had. The lux tax has to be paid in cash out of the owners pockets. The Celts owners are millionaires not billionaires and that is real money to them, it's not reasonable to expect owners to pay lux tax unless the players they are retaining are putting the team at a championship level.
The Celtics have appreciated almost $2 billion, and that's without counting their investment in CSN. They had $60+ million in operating income in 2016, $50+ million in 2015, etc. again, that's without factoring their ownership stake in ancillary businesses.
The idea that a team is unable to pay the tax when it has a franchise valuation of (very conservatively) $2.2 billion, and which annually profits in the tens of millions, is absurd.
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Roy I see your point.
IMO the problem with the lux tax is that the benefits for the owner are not clear.
Sure, he can do it if he 'loves' the team or out of respect for the fanbase, but in purely material terms it often seems like an investment of questionable value.
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Roy I see your point.
IMO the problem with the lux tax is that the benefits for the owner are not clear.
Sure, he can do it if he 'loves' the team or out of respect for the fanbase, but in purely material terms it often seems like an investment of questionable value.
I understand that point, that it's just not "worth" it. I understand it from a value proposition, when adding a vet minimum guy can cost $7+ million in tax.
That's separate and apart from the idea that a team can't afford it, though. I think a lot of fans have bought into the idea that the luxury tax isn't sustainable, though. It's silly. The Celtics could lose the equivalent of $100 million per season for the next 20 years and still would be about even.
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It's a cash flow issue as well. The estimated value of the team is all well and good, but it is not cash in had. The lux tax has to be paid in cash out of the owners pockets. The Celts owners are millionaires not billionaires and that is real money to them, it's not reasonable to expect owners to pay lux tax unless the players they are retaining are putting the team at a championship level.
The Celtics have appreciated almost $2 billion, and that's without counting their investment in CSN. They had $60+ million in operating income in 2016, $50+ million in 2015, etc. again, that's without factoring their ownership stake in ancillary businesses.
The idea that a team is unable to pay the tax when it has a franchise valuation of (very conservatively) $2.2 billion, and which annually profits in the tens of millions, is absurd.
Again, team valuation is not the same thing as cash on hand. I am no finance expert, but I would imagine the only way to use the team valuation without selling the team, would be to take out a line of credit against the value of the team. This is effectively a loan with required payback. Then I suppose the bank would have to be convinced that using this loan money to pay the luxury tax in order to assemble a team that is more competitive is a good investment. They would have to be convinced that a deep playoff run and possibly a championship would bring in more revenues (more games, more concessions, more parking, whatever allied businesses they own which would improve). This may be a risky proposition. Remember those Knicks team under I.Thomas with a $90M payroll and that didn't win squat? Bank are by nature somewhat conservative.
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It's a cash flow issue as well. The estimated value of the team is all well and good, but it is not cash in had. The lux tax has to be paid in cash out of the owners pockets. The Celts owners are millionaires not billionaires and that is real money to them, it's not reasonable to expect owners to pay lux tax unless the players they are retaining are putting the team at a championship level.
The Celtics have appreciated almost $2 billion, and that's without counting their investment in CSN. They had $60+ million in operating income in 2016, $50+ million in 2015, etc. again, that's without factoring their ownership stake in ancillary businesses.
The idea that a team is unable to pay the tax when it has a franchise valuation of (very conservatively) $2.2 billion, and which annually profits in the tens of millions, is absurd.
Again, team valuation is not the same thing as cash on hand. I am no finance expert, but I would imagine the only way to use the team valuation without selling the team, would be to take out a line of credit against the value of the team. This is effectively a loan with required payback. Then I suppose the bank would have to be convinced that using this loan money to pay the luxury tax in order to assemble a team that is more competitive is a good investment. They would have to be convinced that a deep playoff run and possibly a championship would bring in more revenues (more games, more concessions, more parking, whatever allied businesses they own which would improve). This may be a risky proposition. Remember those Knicks team under I.Thomas with a $90M payroll and that didn't win squat? Bank are by nature somewhat conservative.
The Celtics profited $110 million in 2015 and 2016, without even looking at creative accounting practices or CSN profit. That's without even taking that $2 billion appreciation into account.
Also, I suspect that when you offer up a $2 billion asset as collateral on a line of credit, the bank doesn't care a whole lot about what your plan for the money is.
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Some people just don't get that a valuation isn't income. These guys want income just like everyone else.
They made an estimated $50 million with a low salary. Next year they'll be into the tax with a higher payroll and that profit goes way down potentially. Only a sucker would be in a business where he takes all the risk, and yet highly paid employees make more $ than he does. Hence why only a handful of teams pay the tax each year. Most of these guys aren't in this business to sell, they and operate on a budget. Not real hard to understand.
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Some people just don't get that a valuation isn't income. These guys want income just like everyone else.
They made an estimated $50 million with a low salary. Next year they'll be into the tax with a higher payroll and that profit goes way down potentially. Only a sucker would be in a business where he takes all the risk, and yet highly paid employees make more $ than he does. Hence why only a handful of teams pay the tax each year. Most of these guys aren't in this business to sell, they and operate on a budget. Not real hard to understand.
Right. A budget where they make enormous profits, and see their portfolio increase by a factor of 10x - 20x. The idea that ownership "can't afford" luxury tax is a myth.
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It's a cash flow issue as well. The estimated value of the team is all well and good, but it is not cash in had. The lux tax has to be paid in cash out of the owners pockets. The Celts owners are millionaires not billionaires and that is real money to them, it's not reasonable to expect owners to pay lux tax unless the players they are retaining are putting the team at a championship level.
The Celtics have appreciated almost $2 billion, and that's without counting their investment in CSN. They had $60+ million in operating income in 2016, $50+ million in 2015, etc. again, that's without factoring their ownership stake in ancillary businesses.
The idea that a team is unable to pay the tax when it has a franchise valuation of (very conservatively) $2.2 billion, and which annually profits in the tens of millions, is absurd.
Again, team valuation is not the same thing as cash on hand. I am no finance expert, but I would imagine the only way to use the team valuation without selling the team, would be to take out a line of credit against the value of the team. This is effectively a loan with required payback. Then I suppose the bank would have to be convinced that using this loan money to pay the luxury tax in order to assemble a team that is more competitive is a good investment. They would have to be convinced that a deep playoff run and possibly a championship would bring in more revenues (more games, more concessions, more parking, whatever allied businesses they own which would improve). This may be a risky proposition. Remember those Knicks team under I.Thomas with a $90M payroll and that didn't win squat? Bank are by nature somewhat conservative.
The Celtics profited $110 million in 2015 and 2016, without even looking at creative accounting practices or CSN profit. That's without even taking that $2 billion appreciation into account.
Also, I suspect that when you offer up a $2 billion asset as collateral on a line of credit, the bank doesn't care a whole lot about what your plan for the money is.
Yeah, you're right, however like you said before that was over 2 years so only an average of $55 million each year. Paying lux tax of say $10 million comes straight out of that bottom line. Shareholders may not be happy with 20% loss in profit with no guarantee of getting it back via a deep playoff run.
I dunno, this finance stuff is way out of my league, just using intuition here.
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It's not a question of whether they can afford it, it's a question of whether it's a good business decision or not. Like it or not profit matters, they are not running the team as a favor to the fans of Boston. The value of the team is a huge benefit to them and when they sell they will likely reap huge profits. But that is not cash in hand today. As businessmen they will measure cost vs reward. I do not doubt they would pay the lux tax if they thought it would be the difference between competing for a championship or not, but otherwise I can't blame them for deciding not to. Especially when the tax gets more onerous the longer you are over the lux tax line.
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I admit I wish I had thought of this
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Yeah, owners that refuse to pay luxury tax are nothing more than cheapskates and liars. Screw them, get them out of sports ownership, they don't belong.
An owner that puts yearly profits above winning is a turd of an owner and should be forced to sell their team. Let them enjoy their billions in profit from the sale, but get them the hell out of the league.
Owners aren't what I am paying money to watch. I only care about the players, they deserve the vast majority of the money pouring into the league, not some jackass in a business suit.
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It's a cash flow issue as well. The estimated value of the team is all well and good, but it is not cash in had. The lux tax has to be paid in cash out of the owners pockets. The Celts owners are millionaires not billionaires and that is real money to them, it's not reasonable to expect owners to pay lux tax unless the players they are retaining are putting the team at a championship level.
The Celtics have appreciated almost $2 billion, and that's without counting their investment in CSN. They had $60+ million in operating income in 2016, $50+ million in 2015, etc. again, that's without factoring their ownership stake in ancillary businesses.
The idea that a team is unable to pay the tax when it has a franchise valuation of (very conservatively) $2.2 billion, and which annually profits in the tens of millions, is absurd.
First, the Celtics have paid and will again pay the tax, so I am not sure what your point is.
Second, you know very well that the Boston Celtics are not the Oklahoma City Thunder or Minnesota Timberwolves. The Cs are appreciating in value AND are making profits. I am not so sure all the other teams are.
This is basically a strawman you have constructed.
Now if you want to talk about taxpayer funded new stadiums... then you have a point.
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It's not a question of whether they can afford it, it's a question of whether it's a good business decision or not. Like it or not profit matters, they are not running the team as a favor to the fans of Boston. The value of the team is a huge benefit to them and when they sell they will likely reap huge profits. But that is not cash in hand today. As businessmen they will measure cost vs reward. I do not doubt they would pay the lux tax if they thought it would be the difference between competing for a championship or not, but otherwise I can't blame them for deciding not too. Especially when the tax gets more onerous the longer you are over the lux tax line.
Yeah, our posts agree pretty well. Like many businesses, they have annual targets and a budget. They need to show financial performance annually or even quarterly.
Paying the tax one year is not wise investment, you have to be prepared to invest every year to get the reward of team performance on the court. This starts to really add up and without the guarantee of cash flow greater than the annual investment, you can see how it may not be a wise choice.
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It's not a question of whether they can afford it, it's a question of whether it's a good business decision or not. Like it or not profit matters, they are not running the team as a favor to the fans of Boston. The value of the team is a huge benefit to them and when they sell they will likely reap huge profits. But that is not cash in hand today. As businessmen they will measure cost vs reward. I do not doubt they would pay the lux tax if they thought it would be the difference between competing for a championship or not, but otherwise I can't blame them for deciding not too. Especially when the tax gets more onerous the longer you are over the lux tax line.
TP for some reality.
Yeah, lets get rid of owners period, just allow the players to own and run the franchises. I'm sure that will work out just fine.
The owner have a lot of nerve putting up billions of dollars thinking they should make money on an investment, especially one that they actually enjoy.
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It's a cash flow issue as well. The estimated value of the team is all well and good, but it is not cash in had. The lux tax has to be paid in cash out of the owners pockets. The Celts owners are millionaires not billionaires and that is real money to them, it's not reasonable to expect owners to pay lux tax unless the players they are retaining are putting the team at a championship level.
The Celtics have appreciated almost $2 billion, and that's without counting their investment in CSN. They had $60+ million in operating income in 2016, $50+ million in 2015, etc. again, that's without factoring their ownership stake in ancillary businesses.
The idea that a team is unable to pay the tax when it has a franchise valuation of (very conservatively) $2.2 billion, and which annually profits in the tens of millions, is absurd.
First, the Celtics have paid and will again pay the tax, so I am not sure what your point is.
Second, you know very well that the Boston Celtics are not the Oklahoma City Thunder or Minnesota Timberwolves. The Cs are appreciating in value AND are making profits. I am not so sure all the other teams are.
This is basically a strawman you have constructed.
Now if you want to talk about taxpayer funded new stadiums... then you have a point.
What's the strawman?
Essentially, every team is appreciating in value. To use your examples, OKC has averaged about $20 million in profit the last eight seasons. The Twolves have averaged $16 million in profit the last three years. (None of these numbers include the 2017 season).
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1. They can afford to pay the luxury tax.
2. I don't see why they would do it unless they were fielding a super competitive team like GSW, or if a superstar like LBJ or Durant were to come to town.
3. The Boston Celtics are a for-profit enterprise, just like all the other pro sports teams. All the "hometown" or "legacy" or "legend" stuff is great. i soak it up and bleed green and all that. But I also know that at the end of the day, it is just a for profit corporation looking for ways to get bucks out of my pocket. And I've decided I'm okay with that. Hence, I'm not going to fault the owners for not paying luxury tax this year, or any year for that matter, without really good reason to (see Durant, LBJ, etc above).
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They will go into the tax if they are contenders. They want to win. I'm sure they will give up some profits to get to the top again. I don't think anyone is doubting that.
The real question is whether this team is ready to contend. I think they are close. Maybe not this year, we will see. But if we add a top-5 pick (or TWO!) next year, add in the growth of Brown and Tatum and hopefully Zizic, Semi, Yabu, Theis, Nader, etc., we could take the next step and feel good about giving IT the max.
I think the Celtics are coming for LeBron, this team looks built to battle Cleveland.
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Adam Wexler: #Rockets @tadbbrown announces owner Leslie Alexander is putting the team up for sale via Twitter awexlerKPRC
Jonathan Feigen: Forbes in February put a valuation on the Rockets at $1.65 billion. Alexander bought the team in 1993 for $85 million. via Twitter Jonathan_Feigen
Zach Lowe: People have been wondering which owner/group would cash out first after dramatic rise in team valuations over past 5-6 years. via Twitter ZachLowe_NBA
Micah Adams: Adjusted for inflation, Alexander bought Rockets for $144M. If it sells for $2.9B (plausible), hell have a 20-fold return on investment. via Twitter MicahAdams13
We hear it constantly: owners shouldn't be expected to "lose" tens of millions of dollars on payroll. Dan Gilbert allegedly "lost" money during the Cavs championship season.
Nonsense. Beyond the fuzzy math of accounting in professional sports, there's the issue of the appreciation of franchise values. Leslie Alexander is going to make a $2 billion profit. Dan Gilbert has made several hundred million dollars off of Lebron. If a team refuses to pay tax, it's highly unlikely its due to financial hardship.
I have no idea what teams actually profit but it was always my understanding that most the value in owning a sports franchise is in holding for a while to resell it.
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It's a cash flow issue as well. The estimated value of the team is all well and good, but it is not cash in had. The lux tax has to be paid in cash out of the owners pockets. The Celts owners are millionaires not billionaires and that is real money to them, it's not reasonable to expect owners to pay lux tax unless the players they are retaining are putting the team at a championship level.
The Celtics have appreciated almost $2 billion, and that's without counting their investment in CSN. They had $60+ million in operating income in 2016, $50+ million in 2015, etc. again, that's without factoring their ownership stake in ancillary businesses.
The idea that a team is unable to pay the tax when it has a franchise valuation of (very conservatively) $2.2 billion, and which annually profits in the tens of millions, is absurd.
First, the Celtics have paid and will again pay the tax, so I am not sure what your point is.
Second, you know very well that the Boston Celtics are not the Oklahoma City Thunder or Minnesota Timberwolves. The Cs are appreciating in value AND are making profits. I am not so sure all the other teams are.
This is basically a strawman you have constructed.
Now if you want to talk about taxpayer funded new stadiums... then you have a point.
What's the strawman?
Essentially, every team is appreciating in value. To use your examples, OKC has averaged about $20 million in profit the last eight seasons. The Twolves have averaged $16 million in profit the last three years. (None of these numbers include the 2017 season).
That's it?
What is OKC theoretically worth? If you tell me $1 billion that's pretty painful. I mean that would be a 2% return. You can go buy a blue chip stock and get 4%whenever you want. The franchise better appreciate bigly!
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I don't know how much profit Wyc made last year, but I would guess he's not losing money. And I saw a quote from him that they would go over the lux tax threshold for the team this year, since they think they are now competitive for a title. They went over the cap to win the title in '08, and they'll do it again if they think it's warranted. After winning in '08. they decided to get under the cap, and have been for the most part ever since.
I see the Celtics are the 4th richest NBA market ($2.1B) , behind the Knicks, Lakers and Bulls.
NY, LA, Chicago, Boston. Much of their revenue comes from cable TV. They have plenty of money to spend.