Cap management

[BADOLBILZ]

Based on the Forbes data, the Cowboy"s extra revenue from just 4 years is about $1BILLION, so yes they can afford to pay for their stadium. BTW, I don't see Dallas winning much since Jimmy Johnson left.

 

Precisely. Because earn as they might......the Cowboys can't use their extra revenue on personnel.

 

The big shiny stadium doesn't even help much in free agency.......because all that really matters to players is take home pay and winning.

[OldTimer1960]

 

 

Precisely. Because earn as they might......the Cowboys can't use their extra revenue on personnel.

 

The big shiny stadium doesn't even help much in free agency.......because all that really matters to players is take home pay and winning.

 

But the Cowboys CAN afford to spend to the cap whereas the Bills and many other small market teams struggle to do so without losing money.

[BADOLBILZ]

But the Cowboys CAN afford to spend to the cap whereas the Bills and many other small market teams struggle to do so without losing money.

 

Over the past 12 years.......none of which resulted in a playoff appearance......the Buffalo Bills have had a net operating income of $357.8M for an AVERAGE of $29.8M.

 

In those 12 years, in spite of that futility..........the franchise has appreciated from a value of $458M..........to $870M........according to the same Forbes info.

 

That's a lot of cheese OldTimer.........but keep thinking the Bills can't make payroll.

[OldTimer1960]

 

 

Over the past 12 years.......none of which resulted in a playoff appearance......the Buffalo Bills have had a net operating income of $357.8M for an AVERAGE of $29.8M.

 

In those 12 years, in spite of that futility..........the franchise has appreciated from a value of $458M..........to $870M........according to the same Forbes info.

 

That's a lot of cheese OldTimer.........but keep thinking the Bills can't make payroll.

 

Fair point, but do you expect the Bills, Bengals, Jaguars to be able to compete with the Cowboys in terms of spend? Let's assume for the sake of argument that the Cowboys' average operating profit over those same 12'years was only $100MM/yr (less than 1/2 of what they made last year). Given that assumption, the Cowboys had $1.2BILLION vs the Bills $357MM over that same time period. Further, pretty sure that the Cowboys spent more on payroll each year that isn't reflected in those numbers.

 

If you still want to argue that Ralph Wilson was less committed to winning than Jerry Jones because Jerry spent more, but made A LOT more, then I'll concede.

 

I guess part of my point is that it isn't lack of spending that has held the Bills' down, but some poor choices (in hindsight) and some bad luck.

 

No doubt that the Bills have made personnel mistakes, but yet a team that can/has spent considerably more hasn't exactly outdone the Bills by much at all.

 

I think that management skill plays a big part, but blind luck also has a huge hand in NFL success. For instance, the Colts had Peyton Manning miss considerable time the year that Andrew Luck came out and "won the lottery". While I'll grant that in hindsight the Bills missed on not selecting Russel Wilson and Colin Kaepernick, the entire Nfl missed on those guys. If any QB NEEDY TEAM(there are 15 or so per year) thought that they would have been as good as they seem to be, then they'd have each been top 15 picks.

 

The Bills haven't been quite bad enough at the right time to inherit Andrew Luck, Cam Newton, etc.

 

[BADOLBILZ]

Fair point, but do you expect the Bills, Bengals, Jaguars to be able to compete with the Cowboys in terms of spend? Let's assume for the sake of argument that the Cowboys' average operating profit over those same 12'years was only $100MM/yr (less than 1/2 of what they made last year). Given that assumption, the Cowboys had $1.2BILLION vs the Bills $357MM over that same time period. Further, pretty sure that the Cowboys spent more on payroll each year that isn't reflected in those numbers.

 

If you still want to argue that Ralph Wilson was less committed to winning than Jerry Jones because Jerry spent more, but made A LOT more, then I'll concede.

 

I guess part of my point is that it isn't lack of spending that has held the Bills' down, but some poor choices (in hindsight) and some bad luck.

 

No doubt that the Bills have made personnel mistakes, but yet a team that can/has spent considerably more hasn't exactly outdone the Bills by much at all.

 

I think that management skill plays a big part, but blind luck also has a huge hand in NFL success. For instance, the Colts had Peyton Manning miss considerable time the year that Andrew Luck came out and "won the lottery". While I'll grant that in hindsight the Bills missed on not selecting Russel Wilson and Colin Kaepernick, the entire Nfl missed on those guys. If any QB NEEDY TEAM(there are 15 or so per year) thought that they would have been as good as they seem to be, then they'd have each been top 15 picks.

 

The Bills haven't been quite bad enough at the right time to inherit Andrew Luck, Cam Newton, etc.

 

You ultimately can't circumvent the cap over the course of time.

 

Doesn't really matter how much extra money that team makes.

 

The Cowboys and Skins attempted to do so in the loophole "uncapped" year during the labor impasse.........and actually had cap space taken away by the league for doing it.

 

The NFL is remarkably consistent in their policy that teams compete on the same payroll level for players.

 

I'm sorry but your point about not having the same ability to spend is incorrect.

[808]

lol at any NFL team losing money. the tv deals they have and profit sharing ensure that the NFL succeeds as a whole. no team is left not making money.

[Sisyphean Bills]

Fair point, but do you expect the Bills, Bengals, Jaguars to be able to compete with the Cowboys in terms of spend?

 

I think you're missing that the Cowboys have taken on huge debt (borrowed money) to increase their overall value. They own a zillion dollar stadium, but borrowed money to build it. The Bills simply aren't going to do anything like that. They aren't going to take debt on the books at this point. Money like that from the Toronto deal is just cheese to get stacked.

 

Besides spending more than the cap on players is against the rules, as Badol has pointed out. We're not talking about baseball.

[808]

I think you're missing that the Cowboys have taken on huge debt (borrowed money) to increase their overall value. They own a zillion dollar stadium, but borrowed money to build it. The Bills simply aren't going to do anything like that. They aren't going to take debt on the books at this point. Money like that from the Toronto deal is just cheese to get stacked.

 

Besides spending more than the cap on players is against the rules, as Badol has pointed out. We're not talking about baseball.

 

actually they don't owe anything on the stadium. jerry built it and was turning a profit after the first year of operation because of the concerts and everything else they have there fights,ncaa.

[Malazan]

people, seriously, listen to dibbs who has shown himself time and again to be trustworthy. The guy arguing with him has not.

[Sisyphean Bills]

actually they don't owe anything on the stadium. jerry built it and was turning a profit after the first year of operation because of the concerts and everything else they have there fights,ncaa.

 

I don't believe that's really relevant to my point. I remember Jones in an interview around the time it opened talking about how he had big loans to pay back, etc. (with a huge smile on his mug) The Cowboys make a ton of money, as OldTimer points out. It's not really germane if they paid the loans off by now or not. The point is that Ralph Wilson is not going to take out a $870 million loan to build a new, state of the art facility with 300 luxury suites, and on and on, at this point. Doing so would burden the franchise with a debt and make it harder to sell. Jones is no dummy when it comes to leveraging his investments. Ralph and his money guys know what they are doing as well.

 

Also, the city of Arlington is involved and may actually hold the stadium (according to Wikipedia anyway). So, I may have been wrong about who owns the complex.

[San Jose Bills Fan]

I know what the estimated net operating income figures show.

 

It would be nice to know the net profit figures.

[ICanSleepWhenI'mDead]

Stop it now. Perhaps you'd like to buy the Bills and operate at a loss?

 

Why would ANYONE do that unless they were SOOOO rich that it didn't matter? . . .

Why indeed.

 

If I set up a subchapter S corporation or a limited partnership to buy the Bills (so any losses would "flow through" to my personal income tax return and offset some of my taxable income from other sources), I'd be OK with running the franchise at a small, annual taxable loss for 15 years. Emphasis on "taxable."

 

Anybody who buys the Bills today can use the modern version of the roster depreciation allowance (the "RDA") to deduct 1/15th of the entire purchase price every year for 15 years. Let's say that the purchase price is $900 million. That would let the buyer deduct $900M/15 = $60 million each and every year for the next 15 years.

 

Think about that. If I ran the franchise so that I had an annual profit of $60 million per year after considering everything but this particular expense item, my business would have a positive $60 million cash flow every year for 15 years and taxable income of exactly ZERO each of those years.

 

Alternatively, if I ran the franchise so that it merely broke even each year before application of the RDA expense item, the franchise would show a "paper loss" of $60M each and every year for 15 years that I could use to offset my taxable income from other sources (assuming that my ownership structure was set up as a subchapter S corporation or a limited partnership). All while operating the franchise with internally generated cash that required no other financial contribution from me.

 

Given the history of NFL franchise appreciation over the years, I'd take my chances that I could re-sell the team 15 years down the road for a lot more than $900M.

 

But hey, that's just me.

 

If you think the above scenario is unrealistic, read these sources:

 

http://seattletimes....ertaxes05m.html

 

http://deadspin.com/...28-million-loss [author mistakenly assumed that a particular financial expense entry on an NBA team's books was for roster depreciation allowance when it was really for something else, but the description of how the RDA works was accurate]

 

http://econ.la.psu.e...ulson/veeck.pdf [warning - - egghead version written by university professors]

 

The RDA works much like depreciation for rental real estate. It can let the football business be cash flow positive even while generating paper losses for income tax purposes.

 

Ralph's not gettin' any younger. Anybody got about $900 million I can borrow?

Edited January 7, 2014 by ICanSleepWhenI'mDead

[808]

I don't believe that's really relevant to my point. I remember Jones in an interview around the time it opened talking about how he had big loans to pay back, etc. (with a huge smile on his mug) The Cowboys make a ton of money, as OldTimer points out. It's not really germane if they paid the loans off by now or not. The point is that Ralph Wilson is not going to take out a $870 million loan to build a new, state of the art facility with 300 luxury suites, and on and on, at this point. Doing so would burden the franchise with a debt and make it harder to sell. Jones is no dummy when it comes to leveraging his investments. Ralph and his money guys know what they are doing as well.

 

Also, the city of Arlington is involved and may actually hold the stadium (according to Wikipedia anyway). So, I may have been wrong about who owns the complex.

 

well not many owners actually own their own buildings. the nab does this quite a bit and the NFL is very guilty as well of holding counties/cities hostage saying they will move a team unless they use tax payer dollars to flip most of the bills on the stadiums. its a really slime ball type thing to do but it happens with sports teams all the time. its how the seattle lost its nab team and why the rams/raiders have moved multiple times.

 

either way lets not pretend the bills don't have the money to compete. ralph wilson is worth 4.5 billion and no NFL team has lost money for 20 years. the tv deal that they have is huge. and thats revenue shared.

 

on a separate point that kinda grinds my gears just had a little publicity in that its a real jag off thing to do is blackout games that are being played in a taxpayer funded stadium for billionaires… it should be illegal to pull that kinda thing but its the NFL and they got the money so they pay the lawyers to make the rules for them.

[ICanSleepWhenI'mDead]

. . . ralph wilson is worth 4.5 billion . . .

My impression has always been that Ralph keeps his net worth pretty private. I have no doubt that he's rich, but how did you come up with "4.5 billion?" The Bills aren't worth that much, and as far as I know, his other investments are privately held without any required public disclosures.

[Mark Long Beach]

My impression has always been that Ralph keeps his net worth pretty private. I have no doubt that he's rich, but how did you come up with "4.5 billion?" The Bills aren't worth that much, and as far as I know, his other investments are privately held without any required public disclosures.

Mr. Wilson was an investor in my company (through a VC fund). We didn't help him out there. Sorry Ralph.

[San Jose Bills Fan]

ralph wilson is worth 4.5 billion

 

Do you have a source for this information? That seems pretty high.

 

So I just checked the Forbes 400 Richest Americans.

 

The 400th Richest American is worth $1.3 billion.

 

Ralph Wilson is not anywhere on the list.

 

http://www.forbes.com/forbes-400/#page:1_sort:0_direction:asc_search:_filter:All%20industries_filter:All%20states_filter:All%20categories

[Boatdrinks]

But the Cowboys CAN afford to spend to the cap whereas the Bills and many other small market teams struggle to do so without losing money.

Unlike some of the other big time sports, there isn't an NFL team that comes close to losing money...

[Boatdrinks]

 

I think that management skill plays a big part, but blind luck also has a huge hand in NFL success. For instance, the Colts had Peyton Manning miss considerable time the year that Andrew Luck came out and "won the lottery". While I'll grant that in hindsight the Bills missed on not selecting Russel Wilson and Colin Kaepernick, the entire Nfl missed on those guys. If any QB NEEDY TEAM(there are 15 or so per year) thought that they would have been as good as they seem to be, then they'd have each been top 15 picks.

 

The Bills haven't been quite bad enough at the right time to inherit Andrew Luck, Cam Newton, etc.

While you are correct that the Bills haven't been bad enough to have the 1st pick overall required to select the obvious choices like Luck and Newton, they should not be let off the hook so easily. The "other" picks are where GM's show their genius or mediocrity. The "entire NFL" did not miss on Kap and Wilson, as they play for NFL teams. The 49ers moved UP to select Kapernick (I believe it was shortly after the Bills selection in that round, A. Williams maybe?) This was with Alex Smith on the roster. Clearly they had a conviction and went with it. R Wilson had ALL the attributes you want in a starting QB except one..size. SEA felt he was too good to pass up at that point. The Bills have been the most QB starved team for a decade, they should have taken a chance. You have no luck if you refuse to take a chance as a GM. Gregg Williams once stated how much he loved Drew Brees coming out of Purdue, and was so disappointem he was taken before the Bills pick in the 2nd round. If he and TD had the guts to take him in the 1st round by trading down, or moving up in the 2nd Greggo's time in BUF might have been different. Very good QB's were available to the Bills for many years and they refused to take them even though it was low risk /high reward time in the 2nd and 3rd rounds. That is why we are hoping that EJM takes a big leap in 2014. Not because we missed out by being a little less terrible than the Colts or Panthers a few years back.

 

While you are correct that the Bills haven't been bad enough to have the 1st pick overall required to select the obvious choices like Luck and Newton, they should not be let off the hook so easily. The "other" picks are where GM's show their genius or mediocrity. The "entire NFL" did not miss on Kap and Wilson, as they play for NFL teams. The 49ers moved UP to select Kapernick (I believe it was shortly after the Bills selection in that round, A. Williams maybe?) This was with Alex Smith on the roster. Clearly they had a conviction and went with it. R Wilson had ALL the attributes you want in a starting QB except one..size. SEA felt he was too good to pass up at that point. The Bills have been the most QB starved team for a decade, they should have taken a chance. You have no luck if you refuse to take a chance as a GM. Gregg Williams once stated how much he loved Drew Brees coming out of Purdue, and was so disappointed he was taken before the Bills pick in the 2nd round. If he and TD had the guts to take him in the 1st round by trading down, or moving up in the 2nd Greggo's time in BUF might have been different. Very good QB's were available to the Bills for many years and they refused to take them even though it was low risk /high reward time in the 2nd and 3rd rounds. That is why we are hoping that EJM takes a big leap in 2014. Not because we missed out by being a little less terrible than the Colts or Panthers a few years back.

 

While you are correct that the Bills haven't been bad enough to have the 1st pick overall required to select the obvious choices like Luck and Newton, they should not be let off the hook so easily. The "other" picks are where GM's show their genius or mediocrity. The "entire NFL" did not miss on Kap and Wilson, as they play for NFL teams. The 49ers moved UP to select Kapernick (I believe it was shortly after the Bills selection in that round, A. Williams maybe?) This was with Alex Smith on the roster. Clearly they had a conviction and went with it. R Wilson had ALL the attributes you want in a starting QB except one..size. SEA felt he was too good to pass up at that point. The Bills have been the most QB starved team for a decade, they should have taken a chance. You have no luck if you refuse to take a chance as a GM. Gregg Williams once stated how much he loved Drew Brees coming out of Purdue, and was so disappointem he was taken before the Bills pick in the 2nd round. If he and TD had the guts to take him in the 1st round by trading down, or moving up in the 2nd Greggo's time in BUF might have been different. Very good QB's were available to the Bills for many years and they refused to take them even though it was low risk /high reward time in the 2nd and 3rd rounds. That is why we are hoping that EJM takes a big leap in 2014. Not because we missed out by being a little less terrible than the Colts or Panthers a few years back.

 

corrected a typo, but you get the point

[Dibs]

Though I don't believe OldTimer1960 is correct in his belief that the Bills(and small market teams) struggle to be able to afford the cap(which I'll explain me reasons why at the end).......he has highlighted an issue which clearly places the small market teams at a disadvantage.....and potentially a great disadvantage.

 

Though OldTimer1960 has gone through the issue......I feel many did not fully understand the point he was making.

 

The Salary Cap is determined by the total of all of the revenue(AR) every team makes......which is then divided by a certain percentage(roughly 47%).....and then divided by 32(the number of teams).

 

Shared Revenue for each team is however based upon a lesser amount. Essentially only the TV rites, ticket sales & NFL merchandise gets divided equally amongst the 32 teams.

 

The monies any particular team makes from luxury boxes, advertising, naming rites etc goes directly to them......and 47% of the amount, divided by 32, is added to each teams cap.

 

Question 1.2 in the link explains it better....

http://www.askthecom...aryCap/faq.aspx

 

 

A simplistic example:

If the top 5 teams each earn an extra $136m which isn't revenue shared........the cap increases by $10m per team [(136x5x0.47)/32 = 10].....but the other 27 teams don't have the extra revenue to pay for it. Those top 5 teams are better off by $126m each while the other 27 teams are worse off by $10m each.

 

To put things another way......because the Cowboys can make a bigger profit, the Bills have to pay their players more money(without getting additional funding to do so).

 

 

I personally don't believe that it is an issue at this point in time because quite frankly I don't believe the profit figures given out each year by the NFL teams are an accurate reflection of their profits. For tax reasons, it is always in the best interest for private businesses to show as little profit as possible......and that is exactly what I believe the NFL teams do.

 

Other reasons that I see are......it is illogical for a billion dollar company to maintain viability if they are only slightly above the break even point each year......and if things were indeed as tight as the figures show, there would be a greater emphasis from the small market teams to garner revenue. (Ralph Wilson Stadium would be too much of a luxury to afford not to sell the naming rights if the team was making virtually no profits).

 

The only real effect that I see in today's NFL is that the smaller market teams might not have enough cash on hand to be able to pay multiple Signing Bonuses in the one year.......where the big market teams obviously have plenty of cash on hand to do this. I believe that this is why most teams follow a rough Cash to Cap system.

 

 

It might be possible in the future that the AR becomes so much higher than the shared revenue that the small market teams actually will be struggling to pay the cap......but the massive increase in revenue for the new TV deals(coming in 2015) have me doubtful that this will be the case any time soon.

Edited January 8, 2014 by Dibs

[ICanSleepWhenI'mDead]

This link is almost 3 months old, so I'm not sure it's absolutely current, but "supplemental revenue sharing" is relevant to this discussion:

 

http://www.sportsbusinessdaily.com/Journal/Issues/2013/10/14/Leagues-and-Governing-Bodies/NFL-revenue.aspx

 

The NFL shares between half and three-quarters of all — national and local — revenue evenly among the 32 teams. That has not always been enough, though, to ensure competitive balance, so the league started the SRS program in the 1990s.

 

After the fund was established, it wouldn’t be out of the norm to have a number of high-revenue clubs shifting dollars to the lower quartile of clubs in the league, which would cause friction and even public rebuke from some owners who criticized the business acumen of their league partners. In this time, more than $200 million annually shifted between high- and low-revenue clubs to ensure competitive balance. Meanwhile, leading up to the 2011 CBA talks, the NFLPA often contended that the real problem in the league was not between owners and players, but was between the rich and poor in the NFL.

 

Changes in the CBA narrowed the financial gap between the clubs. Last year, the second season of the CBA, only three teams qualified for funds from SRS based on a complicated league formula, and this year only one team will qualify and receive between $5 million and $10 million, sources said.