The REAL problem for the next Bills owner

[Live&DieBillsFootball]

Good points, but there are so many ways to work around all of those issues it isn't a big deal.

For example, Golisano could buy a minority share of the team now, and buy the rest when Ralph dies. No problem.

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True, it would be nice for Golisano to hold a stake now which would give us a better hold on keeping the Bills in Buffalo. However, it still means that in the end Golisano and other investors have to pay $700 million in cash or debt to purchase the Bills. Most of this will be debt and the cost of that debt will have a profound inpact on the profit of the Bills.

 

I'm not saying that it can't be done. It just makes the Bills much less profitable under new ownership unless more revenue can be generated.

[HopsGuy]

How much of Golisano's $1.2B is tied up into other assets? I really doubt that that is the amount he has sitting in his bank account.

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According to Yahoo Finance, Golisano owned 38.1 million shares of PAYX at the end of 2005. That's just over $1.57B using a stock price of $41.23 (real-time 12:41 PM EDT). Of course, a CEO can't sell 19 million shares of stock (enough to buy the Bills outright) without driving the stock to $10. Of course, this makes the $1.2B estimate seem low, considering his ownership of the Sabres.

 

Then again, what's $300 million between friends?

[Pyrite Gal]

One of the reasons that Ralph is sounding the alarm about the long-term viability of the Bills is probably due to the debt load of the next owner.

 

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I think your lead quot gets to a key point and one of the posts below responds to this key point that I think folks who are worried about this tend to ignore.

 

Working in our financial system debt is not necessarily a bad thing.

 

Many of us were brought up in a general framework that viewed life from the context of the general saying, "Neither a borrower, nor a lender be." There is some utility to this advice particularly if you have a large enough resource base to work from and there is a lot of utility to this advice that one of the quickest and most efficient ways to end a friendship is to borrow or loan someone cash that turns the friendship into a fiscal relationship.

 

However, debt is simply a tool which can be used to perform certain acivities you wish to perform but do not have the accumulated cash on hand to make the initial purchase to perform these activities.

 

Yet, in our free-market (well sorta) based society, there are tons of large captial holders who are quite willing to loan a person large amounts of capital to make an initial purchase as long as they can get assurances they are comfortable with that they will be paid back a consistent cashflow which pays off the loan. In essence they put their accumulated capital to work for them.

 

They are quite happy to split the resulting stream of profits with you in exchange for you doing all the work. being compensated for that work reasonably with a chunk of the income, and that still leaving enough for you to pay off the loan.

 

As far as it goes, this is why the NFL works. Under the CBA, a reality has been created where the NFL provides a quality product of great attractiveness and interest to you, me, and a good chunk of the general public.

 

In exchange for the relative guarantee that the NFL composed of team owners and players are going to provide this compelling product that chunks of the buying public will watch on TV, in person, and have some affinity for, the TV networks are a large capital holder willing to pay massive amounts of $ to the NFL for the rights to show this product and sell commercials around it (these commercial sales in the large economic engine call America are where the capital ultimately comes from).

 

The CBA which Ralph is whining about makes a lot of this even possible. It provides a labor peace between the developing partnship between the players and the team owners. Ultimately it is the players play that you and I are willing to pay our nickels to come see (perhaps you would pay your nickels to watch Dan Snyder and Ralph face off against each other every Sunday, but i would not, individual workers are replaceable certainly, but as a whole I am interested in paying to see the workers work and have no interest in paying to see th owners own).

 

The CBA really turns an NFL team into a virtual printing press for money. The lionshare of the income is contractually guaranteed in TV contracts. In addition, a significant source of income is contractually and politically guaranteed in the massive subsidy which county government pays the Bills through owning, providing. bearing the costs for, but providing virtually total ownership and control over the venue for presenting the product.

 

When the Bills originally cut the deal for what was ten Rich Stadium, there was no CBA and really no history of ongoing labor peace. Ralph got a great deal because he in essence got government to bear the costs and risks of venue ownership, while he got virtual total use of the presentation facility and he got a state of the art (at the time) venue out of the deal.

 

However, the situation has changed, what was formerly a cost center (the stadium) and a risk (what if there was a work stoppage and thus no income to pay debt service) has actually become a profit center and an area of low risk under the CBA (worker costs are huge as the NFLPA has demanded a majority of the receipts as people are willing to pay to see them but an axe fight between Al Davis and Wellington mara while it would have been amusing for a brief moment has no real sustainable selling power).

 

What Ralph is angling for with his current alarm bells seems mostly to be an effort to get the taxpayers to bear as much of the costs as possible to build a new presentation venue for the product while affording him as much income from this profit center as he can produce.

 

Government can actually get what is in essence a far better rate on a loan than an independent business can. Whiile government cannot operate as efficiently as a good business can, businesses (even good ones) go away all the time, but as long as society exists government will not go away.

 

(Governments also have an advantage over private businessess in terms of providing the same service more cheaply in that it does not need to make the profits private business must make. This economic advantage of being able to borrow money more cheaply than private business (usually in the form of municipal bonds) and not having the profit mark-up gets eaten up by the greater inefficiencies of government. A good private business is more efficient than government because the bad private businesses uisually go out of business (statistically roughly 50% of businesses incoporated do an elfoldo in the first 5 years). However, I do not want my library, my garbage collection, or my kids school to have a 50/50 chance of going out of business every 5 years thus, I am happy to accept inefficient operations in exchange for long tem consistency. I just need to do a little work on the government run things I care about to lobby them into better performance without the threat of closure but this is another broader discussion.

 

At any rate, NFL teams have as much of a gurantee of cost controls which can be made in our society and because of staulity there is also as much of a gurantee of a large income stream.

 

This is a perfect recipe for having numerous large capital holders be quite happy to loan you large amounts of initial cash to build a venue to sell your product.

 

The debt load on any new owner (even if he had the cash it makes more sense to borrow someone else's money actually) is one which can be well managed as long as the income streams are maintained. The almost 20 years of labor peace under the CBA, and this last showdown amongst the team owners shows that it is a pretty good bet that the income stream can also be continued as long as the workers and the team owners can aggree to a reasonable split of the income stream. As folks clearly would pay to see the workers and would not pay to see the owners, but the workers are individuals and this is alot about management of a collective a 59.5%-40.5% split seems more than fair.

 

If this is to weird for a normal person to relate to, think about this in terms of why it make fiscal sense to borrow the money and go into heavy debt service. The vast majority of American families now own their home. Would it make more sense for you to do the reasonable not a borrower be and instead of getting a mortgage to borrow money, instead you pay for it as you go based on your ability to do work and gain assets. I had enough money to buy a kitchen so I can eat and I had enough to afford a small bedroom so I canm sleep, but I have hopes to buy a bigger bedroom and maybe I will even by a toilet so I do not have to hold it for years.

 

Instead, it makes more sense to go into debt and buy an entire house which you work to payoff the debt service. A new Bills owner has such a large vurtually guaranteed income stream from the TV contracts and other historically doable income streams like ticket sales and Zubazz pants and in addition has very defined and controllable costs primarily in the form of payments to workers whose salaries are defined by the cap that debt service is easily a manageable issue.

 

What Ralph is doing as best as I can tell is bellying up to the taxpayer bar to get government which can borrow money at a better rate than a private business and be a partner that does not have to make a profit provide as many benwfits to him as possible.

 

As the total amount of costs here (a $40 million annual operating cost for the Bills out of over a billion dollars in annual county expenditures) are relatively small, I fully support Ralph sticking up the taxpayers here as I follow (at relartively low charge to me personally) the team and I suspect that if the political deal will be to get the new stadium built in Buffalo, I will and my town will benefit from soaling NYS taxpayers.