The New York Times has a front-page story today on the woes of sports team owners, who are finding that in the post-recession economy their investments may not have the guaranteed appreciation value that they’d grown used to during the bubble years. “It used to be you got bailed out when you sold your team even if you lost money year after year,” sports business consultant Marc Ganis tells the Times. “Now, you’re no longer assured of cashing out to cover your capital costs and losses.”
The evidence presented, though, is a bit sketchy: Aside from last month’s sale of the Tampa Bay Lightning at a huge loss from the $206 million its previous owners paid for the franchise in 2008, and the potential sale of the Charlotte Bobcats to Michael Jordan for less than they garnered in 2002, it’s mostly a list of team owners who ran into financial trouble, via such issues as divorce proceedings and bad real-estate deals, neither of which really has much to do with the value of sports franchises. It could well be that the sports-team bubble has popped, but we’ll need to see a few more cut-rate sales before we’ll know for sure.
The most interesting item in the Times piece: Congress is considering a major hike in the capital gains tax rate, which would certainly change the economics of franchise sales. It would also make the Veeck depreciation loophole much less lucrative, since owners would have to pay more in capital gains when selling a fully depreciated team.