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How the Estate Tax Stole Football

By Scott Costa, Publisher, tED magazine


Let me get this out of the way first:  The St. Louis Rams are no longer the St. Louis Rams because of the Estate Tax.  Our home office is in St. Louis, so we are pretty familiar with most of this story, but perhaps you are not.

Now here is the back-story, and why you need to think about this during the 2016 election year.  When Carroll Rosenbloom died in 1979, he willed the NFL football team he owned to his wife, Georgia.  Georgia would re-marry and take the name Georgia Frontiere.

In 1995, Frontiere moved the Los Angeles Rams to her hometown, which happens to be St. Louis. Along with that move came a bizarre inclusion in the stadium lease that said no matter where the Rams played in St. Louis, the stadium would be ranked in the top 25% in the league after 10 years and again after 20 years.  If it wasn’t in the top 25%, the Rams were free to break the lease and move anywhere else in the country.  Stay with me on this.

In 2005, ten years after the move, the stadium was no longer in the top 25%.  In fact, it would be impossible to keep up with the new designs, the new stadiums, and the new technology that was available for the 31 other NFL stadiums.  Georgia didn’t want to move, so she accepted a modest $30 million upgrade to the stadium, which didn’t put it in the top 25%, but she got a couple of new big scoreboards, better club seating, a new sound system, and a few other things.  The city of St. Louis was so overwhelmed that Georgia didn’t demand more upgrades that it threw in an additional $1 million in upgrades to all of the locker rooms.  We were all going to live happily ever after, with a football team that the fans loved and the team loved right back. It was a great partnership.

Then, in 2008, just two and a half years after the upgrades, Georgia Frontiere died from breast cancer. She willed the team to her two children, Chip Rosenbloom and Lucia Rodriguez.  They also had a great relationship with St. Louis, and wanted to continue that relationship forever.

And then the taxman came.

In case you forgot, the “Estate Tax”, or, as some people call it, the “Death Tax”, means you have to pay a certain percentage on all of your assets if you are inheriting a business from someone other than your spouse.  In the case of Rosenbloom and Rodriguez, the total assets for the St. Louis Rams, at that time, was around $929 million dollars. The siblings were on the hook for about 40% of that amount, which, by my calculations, would be around $371 million.  Except you can’t pay the Estate Tax with a scoreboard, a sound system, or a stadium club seat.  The U.S. government only accepts cash.  Obviously, Rosenbloom and Rodriguez didn’t have it.  They had two choices: Close up shop, or sell.

Sound familiar yet?

So, they sold.  And the guy who bought the team (I won’t mention his name because it has been pretty bad around these parts these days) took advantage of the 20th year on that lease that said the stadium needed to be in the top 25% in the league. By 2015, 20 years after the Rams moved to St. Louis, 29 of the other 31 teams in the league either had a new stadium altogether or had significant upgrades to their stadium.  The new price tag to get the stadium to meet the contract was somewhere around $800 million. So that new owner packed up the Rams and moved them back to Los Angeles just a few weeks ago.

And now St Louis doesn’t have the Rams any more. We had an extremely successful partnership in St. Louis between the city and the Rams before the Estate Tax forced a sale in 2008.  The team was thriving. The city was thriving.  But the Estate Tax offered no alternative.  The new owner came in and, as many NFL analysts and experts will tell you, pretty much ran the team into the ground. 

It’s not a decision you want your children to be forced to make.  Not to mention all of your employees. How are they going to take the news that you have to sell or close because of a death in the company?

Last April, the House voted to permanently repeal the Estate Tax.  On April 20th, the Senate received the bill.  Since then, nothing.  It still exists today.  Meanwhile, our NAED members who own 2nd, 3rd, or even 4th generation businesses are forced to prepare a financial succession plan.  But if the tax is repealed, it will allow those business owners to invest more in their business, including hiring more people, and supporting the economy.

We should also point out that the Estate Tax really only provides a small percentage to the overall federal revenue, so it’s not like we would have to cut programs if it were to go away.  More than anything else, as others have smartly described it, the Estate Tax is simply a punitive tax on wealth creation.

It is important that this key hurdle to improving the future of your business is addressed during this election year.  Yet, like the rest of you, I hear a lot of talk about other political issues, but not this one specifically.  Now is the time for you to learn how the people running in your district and your state stand on repealing the Estate Tax. Our NAED Government Affairs Department is here to help you if necessary.

St. Louis will survive without NFL football for 16 Sundays a year. The players, coaches, and executives will be fine when they move to Los Angeles. But they leave behind an entire staff of Community Relations people who no longer have jobs.  And the entire sales staff is currently looking for work.  The people who work concessions don’t have that source of income any more.  Do you really want your children to be the ones who have to break that news to your employees because they can’t pay a tax that really has no impact?

Rather than wait any longer, check out the NAED Government Affairs web page to get the latest on this issue and the many others that are impacting the financial future of our supply chain. With this being an election year, your vote will count toward making sure these issues are addressed.


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