Republic: Don't sell Colangelo's legacy short

[George O'Brien]

Arizona Republic

Don't sell Colangelo's legacy short
Mar. 10, 2004 12:00 AM

Hard hats are required on Jefferson Street. The bricks of an empire are falling.

Jerry Colangelo needn't apologize to anyone.

While his decision to sell the Suns is being downplayed by the principals involved, it carries an inevitable ending almost shocking in magnitude.

The basketball team will be leaving the Colangelo family. When it does, the heir - President and General Manager Bryan - will not assume control. Instead, he will go looking for work.

Knowing the father, this can't be a proud moment.

Yet the situation tells you much about Colangelo. If he could afford to bequeath the Suns and pay estate taxes, he would. But he can't foot the bill. The emperor has plenty of clothes, tailored for all the politicians that must fit in his pockets. He just doesn't have the cash, although that will soon change.

It surely upsets no one that young Bryan will never take the throne. He has been dealing with silver-spoon accusations most of his adult life, and most will be happy to see him with plastic cutlery.

That is, if anyone cares. The Suns' fan base has shrunken so drastically that Colangelo's ramped-up intentions to sell barely caused a ripple, although a bit of public outrage would have been acceptable.

The suspicious timing of two events - refurbishing the arena and stripping the team of high-priced talent - is typical of an owner wishing to sell, not rebuild from scratch. The grand plan seems much different than advertised.

This should also close the book on the myth surrounding Kobe Bryant. No marquee free agent will come to Phoenix knowing the player-friendly Colangelo could be replaced by Ebenezer Scrooge at any moment.

But maybe this wasn't so scripted. Maybe after signing Stephon Marbury to a contract extension in October, Colangelo waited to see whether the Suns captured the market. He quickly decided the team was going nowhere and the revenue streams were drying up. He instructed his son to avoid luxury tax penalties at all costs.

Along the way, getting out of $20 million in losses for the season morphed into getting out completely, and I don't blame him one bit.

In recent years, Colangelo's walk on the financial tightrope with both the Suns and Diamondbacks has been incongruent with his omnipotent image. In some quarters, it has lessened the perception of him, and don't think he doesn't know it.

To the contrary, this should be a tribute to a self-made man who has played the shell game better than anyone. Colangelo is an owner whose wealth is in equity, not inheritance or dot-com jackpots. He is an owner who worked his way up, holding his own against billionaires. We're all better for it.

If that means Bryan is the man who won't be king, it's a small price to pay.

If that means Colangelo peeked into his own sunset at age 64 and decided he'd like some heavy money to enjoy life and his wife before time takes it all away, well, that should warrant the first standing ovation of the season.

 

[thegrahamcrackr]

I hate Dan Bickley so much. He is so overly resentful of BC. He has openly taken jabs at both the Cs throught the last few years. I have never seen a local writer hate his team as much as him. I don't want an absolute homer writing articles, but I don't want a jack ass either.

 

[George O'Brien]

Originally posted by thegrahamcrackr
I hate Dan Bickley so much. He is so overly resentful of BC. He has openly taken jabs at both the Cs throught the last few years. I have never seen a local writer hate his team as much as him. I don't want an absolute homer writing articles, but I don't want a jack ass either.

He's an inconsistent jack-ass. On one hand he praises the Colangelos for being "player friendly" and now damns them because they MIGHT sell to someone who isn't -- SOMEDAY.

The comment he made about Kobe is simply illogical. There are some who question whether Kobe is the answer and the Suns highest priority; but no one doubts that having someone of Kobe's star quality wouldn't fill AWA. Yes the Suns dumped some expensive players, but in the case of Penny - not a very good one one. Hardaway is exciting, but hardly the same draw that Kobe would be.

BTW, I continue to insist that the likelyhood of Kobe coming to Phoenxi is remote, but that was not Bickley's point. Signing Kobe might not bring a championship, but it would make the team more valuable to new investors.

 

[thegrahamcrackr]

You are right, he is an inconsistant jack ass. That just makes me dislike him even more.

I agree with the Kobe assesment. Yes JC would play a role in his recruitment. However, if JC gets his way, he will be in charge for the majority of Kobes next contract anyways. Plus when a superstar player is under a max contract with a team, any ownership will cater to him. It isn't like he is looking for the team to take care of him after he retires.

Plus, the idea is Jerry will only sell to someone he believes will follow his path. Some people have no trust for the man, but I believe that statement through and through.

 

[F-Dog]

Up until the Utah trade, I would have agreed that JC would act in the Suns' interest as well as his own. Now, I think it's clear that he'll sell to the highest bidder, regardless of consequences.

I feel bad that the team will probably lose BC, who seems to do a good job--He seems honest in interviews, I like the draft and personnel moves the team has made in the past couple of years, and I like D'Antoni and the coaching staff. If BC continued running the team, JC could go jump in the ocean for all I care.

 

[thegrahamcrackr]

Originally posted by F-Dog
Up until the Utah trade, I would have agreed that JC would act in the Suns' interest as well as his own. Now, I think it's clear that he'll sell to the highest bidder, regardless of consequences.

Out of curiosity, what made you change your view? You can't possible be talking about shipping a mid first round pick and a 2009 first rounder to save about 13 million dollars.

That move wasn't the best deal any of us have seen. However, that pick wasn't likely to make any significant impact on the court (it most likely would have been traded to someone else this summer anyways since we would rather the cap space), and by saving the 13 million it gives the suns some financial viability.


That deal hardly makes or breaks JC's intention for the suns.

 

[SweetD]

The Suns can go over the cap to sigh a free agent next year right??? Since the Suns are under the cap they can go as far over as they want to sign someone.

 

[George O'Brien]

Originally posted by SweetD
The Suns can go over the cap to sigh a free agent next year right??? Since the Suns are under the cap they can go as far over as they want to sign someone.

I don't think so. The first year amount the Suns can offer will be up to the cap. However, they can increase by 10% per year for the next five years. A contract starting at $13 million will be $100 million over the six years.

 

[slinslin]

No.

You can only do that with the players whose rights you own.

We won't have any because we will renounce everyone who is in the last year of his contract to get maximum capspace.

 

[F-Dog]

Originally posted by thegrahamcrackr
Out of curiosity, what made you change your view? You can't possible be talking about shipping a mid first round pick and a 2009 first rounder to save about 13 million dollars.

I don't see why you would doubt me. This is the first trade I've seen from the Suns that can't be justified in a basketball sense--the team took assets off the table and received nothing but cash in return, pocketed by ownership that is selling the team instead of reinvesting the money. "Not the best deal" (for the fans, anyway) is an understatement.

(The 2009 pick bothers me most of all, because you can't even argue that the Suns won't need it (wrongheaded though that argument is), and there's a decent chance it will be unrestricted when the Jazz finally get it. If Utah turns out to be the Detroit Pistons of 2009, will you still be happy that JC sold out even wealthier than he would have been otherwise?)


If JC has two buyers for the team, and one buyer offers $13m more than the other, the Suns are going to wind up with buyer #1. Do you have any reason to dispute this?

 

[Skkorpion]

Bickley's job is to be controversial. Having said that, the only two times I've seen him at the Cards complex, he seemed arrogant and aloof.

I fault him for not questioning Jerry Colangelo's sincerity in searching for "a minority partner."

What garbage. You don't need to raise prices, refurbish the arena and dump salary and draft picks to find someone to put 20 or 30 million into a team with a solid history and a good future.

You need to do these things when you are desperate to show a good set of books so you can get the hell out of an investment gone bad.

I firmly believe we need a new owner soon, if we are to improve this offseason. Jerry long ago moved on to baseball, his first love, and the Suns have suffered ever since.

Colangelo has been the best of owners, always trying to win. Now he's quit trying and is moving on. Thank you Jerry. Sell the team quickly, please.

 

[thegrahamcrackr]

I can see why the trade is botehrsome. I definitely think we gave up to much.

However, it did have some impacts for the basketball team.

It freed up about another million of cap space. Like I have said before, the pick was sure to be traded, we wouldn't take 2 firsts this year, therefor it isn't that big of a deal.

Also, since when do you know how the money will be reinvested? It is possible that the savings will allow the team to extend a contract for the MLE this year. Even if there are not effects with team personel, that does not mean the money goes to the owners. It could be used to hire more scouts, increase advertising ect. Hell, it could even enable the team to donate more money to charity. (They just put a full basketball court in PCH btw, I never saw that posted).

If JC has two buyers for the team, and one buyer offers $13m more than the other, the Suns are going to wind up with buyer #1. Do you have any reason to dispute this?

Yes I do. If buyer one is a punk, he will sell it to buyer number 2. If buyer 1 wants to move the team, he will sell it to buyer 2. If buyer 1 wants immediate control, but buyer 2 wants to sit back and learn for 5 years, he will sell to buyer 2.


The purpose of the sale is to avoid inheritance taxes, not to rid himself of the team.

 

[Skkorpion]

Originally posted by F-Dog
Up until the Utah trade, I would have agreed that JC would act in the Suns' interest as well as his own. Now, I think it's clear that he'll sell to the highest bidder, regardless of consequences.

I feel bad that the team will probably lose BC, who seems to do a good job--He seems honest in interviews, I like the draft and personnel moves the team has made in the past couple of years, and I like D'Antoni and the coaching staff. If BC continued running the team, JC could go jump in the ocean for all I care.

F-Dog, I agree. Once we started dumping first round picks, I realized Colangelo has opted out for good.

 

[George O'Brien]

Actually I do doubt it. The issue is immediate cash and not the price they can sell the team for. If anything, the Googs deal suggests the Colangelos are not in a hurry to sell because otherwise they wouldn't need the cash right away. But I have no doubt that the future pick reflects the Colangelos belief that they will be out of it by then.

I do not think the Colangelos are planning to do an Atlanta Hawks. As it was, the team was not gutted until after the sale was all but concluded.

I do think that a bad salary structure like that of the Knicks depresses the value of the team, but I don't think having no players makes the team more valuable. The best position is to avoid having too many overpriced players on the payroll - whether you are trying to sell the team or not.

 

[slinslin]

I think an immediate sale will probably be better than having someone slowly take over.

It is not like Colangelo has done such a good job in the past.

They need to do what's best to have a succesful offseason and of course I don't know how it would affect FA if the team is sold to someone else.
It would definately depend on who it is sold to and wether the guys in charge stay in charge.

 

[Skkorpion]

Selling the team does nothing to protect an estate from inheritance taxes.

Hopefully, a competent tax lawyer will see this thread and elaborate but the reality is that any estate over $750,000 is taxed at a rate that is the same, regardless of the composition of the assets.

Trusts can be used to help shield against taxes. However, if an estate is valued at say $320 million, the taxes will be the same regardless if that estate is all in cash or all in hotel properties.

Selling raises cash. That's all.

 

[Chaplin]

The thing is, we are definitely a better team than our record would suggest. Make a list of all the sub-.500 teams, and I think the Suns would overwhelmingly be considered the best of the bunch. While that doesn't mean anything in respect to the playoffs, think about it.

I do question giving up so many first rounders, and what happens if we don't get Kobe OR McGrady next year? What good is getting all that cap space then? Even with all the for sale talk, there's got to be a cohesive plan of attack with the team. Who in their right mind, if they are really serious in selling the team, would gut it and effectively lower its value?

Say we actually do get Kobe Bryant. All of a sudden our team has a ton of value--the arena sells out all the time, we become known NATIONALLY because of endorsements, AND we go deep into the playoffs. Would Jerry really want to sell after his profits start to rise?

This season has been filled with acts of desperation, from getting rid of Bo and Jake to Steph, to Googs and losing first rounders. Perhaps we're reading too much into this. Perhaps this isn't as desperate a situation as the media is making it out to be.

Hard to know, because Colangelo has effectively distanced himself from basketball fans for the first time in 36 years.

 

[slinslin]

Another point.

If Colangelo believes he can get Kobe , why would he sell right now or in the next 4 month?

If he can get Kobe that will raise the price tag by a good amount.

 

[thegrahamcrackr]

Originally posted by Skkorpion
Selling the team does nothing to protect an estate from inheritance taxes.

Hopefully, a competent tax lawyer will see this thread and elaborate but the reality is that any estate over $750,000 is taxed at a rate that is the same, regardless of the composition of the assets.

Trusts can be used to help shield against taxes. However, if an estate is valued at say $320 million, the taxes will be the same regardless if that estate is all in cash or all in hotel properties.

Selling raises cash. That's all.

I definitely don't have the knowledge of tax laws to really talk about it. I just read it in one of the many articles. Something about his estate planning and taxes. If I didn't have to work I would try and find it.

However, I didn just stumble onto this.

The move, he said, isn't so much about finances as it is about the team's long-term succession plan of ownership.


"It has to be the right person," Colangelo told ESPN.com on Monday. "We don't need to raise any money right now. It's more about me being 64 [years old]. It's time to work on the transition and plan for a passing of the baton in the future."

http://sports.espn.go.com/espn/sportsbusiness/news/story?id=1754191

 

[elindholm]

Hopefully, a competent tax lawyer will see this thread and elaborate but the reality is that any estate over $750,000 is taxed at a rate that is the same, regardless of the composition of the assets.

There are ways to start distributing the money once its in cash, to protect at least some of it from inheritance tax. For instance, you can give $10,000 per year per recipient to future heirs tax-free, every year for as long as you're alive. Obviously $10,000 here or there won't make any dent in the kind of money we're talking about in this case. But I think the general point is that, while the money is all tied up in the club, it's harder to move it around. Colangelo wants to have time to get his and his heirs' finances in order before he actually passes away.

 

[thegrahamcrackr]

Originally posted by elindholm

There are ways to start distributing the money once its in cash, to protect at least some of it from inheritance tax. For instance, you can give $10,000 per year per recipient to future heirs tax-free, every year for as long as you're alive. Obviously $10,000 here or there won't make any dent in the kind of money we're talking about in this case. But I think the general point is that, while the money is all tied up in the club, it's harder to move it around. Colangelo wants to have time to get his and his heirs' finances in order before he actually passes away.

Thank you for fixing my horribly botched attempt and a thought

 

[Skkorpion]

thegrahamcracker, I agree that you read the tax reference. I remember that too but I think that was just a reporter's misinformed interpretation of Jerry Colangelo's meaning.

My guess is Jerry doesn't want to manage two pro teams anymore AND he wants to spend some of his wealth now. I can't blame him.

We'll miss him. For much of the time Jerry owned the Suns he was the best owner in the NBA.

 

[George O'Brien]

I think Bickley and others have tried to make more of this "for sale" deal that it warrents. If the Colangelos were despirate to sell immeidately, I'm sure they would go through private channels. The approach they are using is designed to get the most money, not the quickest sale.

Even when a buyer is found and a price is set, it can take years for the deal to be finalized. It sounds like the Colangelos want to do a "phased" deal were they retain control while the buyer takes an ever increasing proportion of stock. This is just an extension of the idea that the Suns would bring in a partner. The difference is that the partner is expected to take over after a while.

Considering all, I think the Colangelos will be running things five years from now but by that point they will be on the way out.

 

[JCSunsfan]

It always bugs me that people will not simply believe what the man said. Jerry Colangelo has been very forthcoming over the years. He is doing so now.

Slin, baseball is NOT JC's first love, basketball is. He played the sport and he cut his teeth as a young (28 year old) GM. He loves this city and he loves this team.

He wants to see it in the right hands. He said its not that he needs the money right now (sorry Bickley, thats what he said), but he does want alot of suitors for this team so that he can put it in the right hands.

If BC wants a team, he's going to have to put an ownership group together and buy it from the old man. I like that. Don't know if Bryan has the guts to do it.

The team's worth somewhere around $300 million. JC has a 20% ownership stake. That means I could buy controlling interest in the Suns for around $60 million. Why don't we pass the hat and see if we can get it together?

 

[thegrahamcrackr]

JC said in an interview a couple days ago that his first love is baseball, and he used basketball as a way to get into baseball. However, he loves basketball almost as much.