Should Donald Trump Buy the Buffalo Bills?

Donald Trump is rumored to be considering a purchase of the Buffalo Bills. Although the team is one of the NFL's worst, an investment could be a wise move for both sides.

Apr 4, 2014 at 8:21AM

Bills

Donald Trump is no stranger to headlines, though few are as exciting for sports fans as what happened this week. The billionaire informed a Buffalo-area radio station, via ESPN, that he's been "talked to" about buying the NFL's Bills, adding, "if it were me, I'd keep the team in Buffalo." For the second biggest city in New York, that's ultimately good news considering the rumors the franchise could bolt after its stadium lease is up next decade. Would it be wise for Trump to buy the Bills?

The business of football in Buffalo
According to Forbes, the average NFL team was worth a little under $1.2 billion last season. Big-market clubs like the Dallas Cowboys and New England Patriots are worth nearly twice as much, while 20 of the league's 32 teams are worth less. The Bills rank 30th with an estimated value of $870 million.

Buffalo Bills Financials
  2013 (est.) Change from 2012
Value $870.0M 8.1%
Revenue 256.0M 6.7%
Operating Income 12.6M -57.1%
Player Expenses 166.0M 22.1%

Data via Forbes. Image (above initial text) via Michael Cardus, Flickr.

Like most teams, Buffalo's value typically expands moderately each year, and revenue has historically kept pace. Where the Bills faltered last year was in the expense column -- player costs rose by 22% and operating income subsequently dropped.

The team has issued a handful of mammoth contracts in recent memory, including $16 million a year to Mario Williams, nearly half that to Stevie Johnson, and a remarkably large extension with Ryan Fitzpatrick before cutting him last spring. Unfortunately, though, these expenses haven't paid off on the field.

The Bills have finished 6-10 in three consecutive seasons, and haven't had a winning record since 2004. Even worse, they haven't made the playoffs since 1999. And while a lack of success and a small market -- Buffalo ranks 26th in the NFL in market size -- may be responsible for the Bills' financial woes, that doesn't mean "The Donald" should stay away.

How the Bills could help Trump ... and vice versa
In fact, it may be a smart financial decision to buy the Bills. As Mike Ozanian recently explained on Forbes, the move would save the billionaire "a fortune in taxes." He writes:

The Bills would go for around $900 million, and tax law established in 2004 [known as "roster depreciation allowance"] allows the buyer to count the majority of the purchase price as an "intangible" asset that can be amortized – deducted from profits – over 15 years.

Assuming the team makes somewhere near $200 million in pre-tax income during this period and "$800 million of the purchase price is amortized," Ozanian says (emphasis mine), "such a large write-off would eliminate the team's tax bill entirely." While the IRS's RDA rule has changed over the years, it's arguably at its friendliest currently.

Interestingly, one of the franchise's all-time greats thinks Trump can also help the Bills. Future Hall of Famer Andre Reed recently told TMZ Sports he believes Trump "would uplift the whole city," adding, "The Bills are in such disarray, that bringing in The Donald would give fans hope that the team would stay in Buffalo."

The bottom line
I tend to agree with Reed. If the team has any hope of remaining in Buffalo, it will need a spark. Attendance is regularly in the NFL's bottom third, and the financials leave a lot to be desired. While Trump may not usher in an era of domination on the football field, his name brings the necessary star-power to reinvigorate fan support.

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