What is the actual requirement regarding guaranteed money?

[Augie]

I went to college in Cincinnati and there is a Bengals thread concerning their future with el-cheapo as owner. I always thought the guaranteed portion of a contract had to be put in escrow up front, but now I’m hearing different things. I don’t know what to believe. I thought it was 100%, other people are saying there is some formula that is less than 100%, and then others throw out the league “may” require the money in escrow vs “shall” put the money up front. 

 

 

https://www.nbcsports.com/nfl/profootballtalk/rumor-mill/news/nfls-funding-rule-isnt-mandatory-did-the-browns-make-escrow-payment-for-deshaun-watson-deal

 

Maybe this is a dumb question? Maybe Florio is just being Florio?  Can anyone clear this up? I know many of you are FAR more informed when it comes to stuff like this. 

 

Thanks in advance. 

 

 

.

Edited September 8, 2023 by Augie

[BarleyNY]

I believe the wording of the antiquated rule is now being scrutinized. It used to be that guaranteed money had to be put in escrow - and some owners used that to their advantage when negotiating. But now with the increasing amount of guaranteed money in some of the huge contracts everyone is looking much more closely into what is really required. I don’t know where that has landed (or will land). 

 

Edited to add: This is one reason why you now see “fully guaranteed” and “total guaranteed” in the breakdown of contracts. Some big contracts have rolling guarantees that are effectively fully guaranteed, but they are not officially guaranteed until a later date. That way the money doesn’t have to be escrowed until that later date. 

Edited September 8, 2023 by BarleyNY

[Augie]

 

If Haslam “cheated” the normal process by not parking 100% of the guaranteed money in escrow, and if the league “may” require that, why did the other owners not force Goodell to require the full amount? He works for them. Were they afraid of collusion charges when it comes to light they were against fully guaranteed contracts? There are layers to this, I have to believe. 

 

I don’t usually get caught up in the money side of things, but this has me curious as to what is really happening. 

[EmotionallyUnstable]

This is interesting.

 

I also am curious where the $$$ comes from. Does the owner/team have to fork over the cash into an escrow to be paid out yearly in base salary?

 

How about a guy that’s paid a large signing bonus (say 40 million)? Does the team pay this with their cash reserves upfront, even though they can spread the cap hit out over multiple seasons? 
 

Just thinking as some of these QB deals are coming with huge bonuses as well as the countless restructures beans used to lighten the cap load temporarily, where does that cash come from?

[Augie]

5 minutes ago, EmotionallyUnstable said:

This is interesting.

 

I also am curious where the $$$ comes from. Does the owner/team have to fork over the cash into an escrow to be paid out yearly in base salary?

 

How about a guy that’s paid a large signing bonus (say 40 million)? Does the team pay this with their cash reserves upfront, even though they can spread the cap hit out over multiple seasons? 
 

Just thinking as some of these QB deals are coming with huge bonuses as well as the countless restructures beans used to lighten the cap load temporarily, where does that cash come from?

 

Burrow gets $219 Mil guaranteed. His WR’s will demand a fortune next year. Can the Bengals afford to put $300 Mil+ in cash in escrow? How deep are those pockets? Didn’t the Raiders lose some guys a few years back because they just didn’t have the cash for the guaranteed portion? 

 

I don’t know what to believe. 

[EmotionallyUnstable]

Just now, Augie said:

 

Burrow gets $219 Mil guaranteed. His WR’s will demand a fortune next year. Can the Bengals afford to put $300 Mil+ in cash in escrow? How deep are those pockets? Didn’t the Raiders lose some guys a few years back because they just didn’t have the cash for the guaranteed portion? 

 

I don’t know what to believe. 

This is was interests me. 
 

Does the terminology simply mean that they have the option to escrow it, or does a team by guaranteeing themselves box them into paying it down the line with future years $$$.

 

As that article suggests, I’m assuming that no teams actually use an escrow but the use the language as a bargaining tool (although you’d think an experienced agent would see through this). 

[Augie]

@EmotionallyUnstable

 

I’m not so sure? 🤷‍♂️

 

 

I’m lazy, so I copied and pasted from my college hoops board here: 

 

 

I’m not swearing this is the ultimate source of truth, but the first thing I stumbled across agreed with my understanding of the situation. 

https://www.reddit.com/r/nfl/comment...teed_money_in/

EDIT: from this article:

https://www.cbssports.com/nfl/news/n...ners-meetings/

“Per current league rules, all future fully guaranteed money due in a player contract must be placed in escrow at the time the deal is consummated. It's antiquated and has long been a bone of contention for the NFLPA. It was implemented long before the NFL became the 365-days-a-year revenue and content monster it is now, and it was put in place on the surface to prevent a team from defaulting on a contract to a player.”

A team might need to park a couple hundred million plus in escrow if you’ve got some superstars. You need to have a bit of extra cash laying around, and not every team is on equal footing financially. It’s a function of the market/team and how many billions your owner has. 

I also find some other stuff that seems more fuzzy, but placing it in escrow on contract day was my understanding. There may be some wrinkles there that some capologist can help us with. 

Edited September 9, 2023 by Augie

[Augie]

Who knows this stuff? Does a team really have to put 100% of the guaranteed money in escrow when a contract is signed? 

[The Wiz]

58 minutes ago, Augie said:

Who knows this stuff? Does a team really have to put 100% of the guaranteed money in escrow when a contract is signed? 

I believe that is the case.  This was always where the "ralph is cheap" came from because of his "cash to cap" philosophy.  He would not give out big guarantees because of the money that he would have to front in order for to sign/restructure/extend players.  That why you see the more common "cash over cap" and owners being willing to put their own money up front on players that they want to keep/sign.

 

This is also true with how teams like the Raiders and the Bengals operated for a very long time.  I think I saw the last largest guarantee that the bengals gave out was something like 30m and that was 8-9 years ago prior to the Burrow deal.

Edited September 9, 2023 by The Wiz

[Augie]

1 minute ago, The Wiz said:

I believe that is the case.  This was always where the "ralph is cheap" came from because of his "cash to cap" philosophy.  He would not give out big guarantees because of the money that he would have to front in order for to sign/restructure/extend players.  That why you see the more common "cash over cap" and owners being willing to put their own money up front on players that they want to keep/sign.

 

This is also true with how teams like the Raiders and the Bengals operated for a very long time.  I think I saw the last largest guarantee that the bengals gave out was something like 30m and that was 8-9 years ago.

 

This is why I don’t get the whole Florio thing that it’s not necessarily required. The “may” vs “shall” argument, and the questions about whether the Browns actually put 100% of the guaranteed Watson money into escrow. Maybe they did, and he’s just stirring the pot.   🤷‍♂️

[aristocrat]

So we think the bengals owner is living paycheck to paycheck? Probably just took a margin loan off his portfolio. 

[Augie]

14 minutes ago, aristocrat said:

So we think the bengals owner is living paycheck to paycheck? Probably just took a margin loan off his portfolio. 

 

I think the Bengals and Raiders owners are relatively “poor” by NFL standards. I remember the Raiders being unable to sign some guys because they lacked the cash, either for signing bonuses or guaranteed money. I mean, $219 Mil for one guy? Their two WR’s would cost as much as the QB.  That’s not pocket change, even for a billionaire. We are fortunate to an owner with deep pockets. 

[aristocrat]

34 minutes ago, Augie said:

 

I think the Bengals and Raiders owners are relatively “poor” by NFL standards. I remember the Raiders being unable to sign some guys because they lacked the cash, either for signing bonuses or guaranteed money. I mean, $219 Mil for one guy? Their two WR’s would cost as much as the QB.  That’s not pocket change, even for a billionaire. We are fortunate to an owner with deep pockets. 

the raiders thing was because they were building a stadium and ran into some construction overages iirc. So it was like one year where cash was a little light and middle of Covid I think or something. 
 

I remember a story of haslam buying the browns and the league asked him if he wanted any investors cause there is a long list of people who want to buy percentages of teams but not the whole thing. He was like no thanks my wire is on the way im paying cash. 

[Augie]

1 minute ago, aristocrat said:

the raiders thing was because they were building a stadium and ran into some construction overages iirc. So it was like one year where cash was a little light and middle of Covid I think or something. 
 

I remember a story of haslam buying the browns and the league asked him if he wanted any investors cause there is a long list of people who want to buy percentages of teams but not the whole thing. He was like no thanks my wire is on the way im paying cash. 

 

This is relevant to nothing, but I would NOT want to be partners with Haslam in anything.  

[aristocrat]

21 minutes ago, Augie said:

 

This is relevant to nothing, but I would NOT want to be partners with Haslam in anything.  

I wouldn’t wanna be an employee but the guy prints money in his business.

[The Wiz]

1 hour ago, Augie said:

 

This is why I don’t get the whole Florio thing that it’s not necessarily required. The “may” vs “shall” argument, and the questions about whether the Browns actually put 100% of the guaranteed Watson money into escrow. Maybe they did, and he’s just stirring the pot.   🤷‍♂️

Without diving into the actual rule and when it was written, I would guess that Florio is just arguing the "legalese" of the rule.  With the "may" and "shall" statements.

 

The reason I say "when" it was written is based off a guess that it's possible that the NFL, before it became the cash cow that it is with billionaire owners, might have felt that they had to say "they may require them to put money into escrow" for owners that weren't as flush with cash as they are in todays NFL.

 

Also, I do not know if this only applies to fully guaranteed contracts or any guarantee in the contract (my guess is the prior).

[Augie]

Just now, aristocrat said:

I wouldn’t wanna be an employee but the guy prints money in his business.

 

No, not an employee, because isn’t that who usually takes the fall for crooks? 

[Augie]

1 minute ago, The Wiz said:

Without diving into the actual rule and when it was written, I would guess that Florio is just arguing the "legalese" of the rule.  With the "may" and "shall" statements.

 

The reason I say "when" it was written is based off a guess that it's possible that the NFL, before it became the cash cow that it is with billionaire owners, might have felt that they had to say "they may require them to put money into escrow" for owners that weren't as flush with cash as they are in todays NFL.

 

Also, I do not know if this only applies to fully guaranteed contracts or any guarantee in the contract (my guess is the prior).

 

That’s the thing….I just don’t know and there seems to be conflicting info. As posted above:

 

EDIT: from this article:

https://www.cbssports.com/nfl/news/n...ners-meetings/

“Per current league rules, all future fully guaranteed money due in a player contract must be placed in escrow at the time the deal is consummated. It's antiquated and has long been a bone of contention for the NFLPA. It was implemented long before the NFL became the 365-days-a-year revenue and content monster it is now, and it was put in place on the surface to prevent a team from defaulting on a contract to a player.”

 

 

“Fully guaranteed money” is not a fully guaranteed contract. It is that portion that is guaranteed. I’m just not sure what to believe and a bit confused over why this isn’t more clear. 

[The Wiz]

1 minute ago, Augie said:

 

That’s the thing….I just don’t know and there seems to be conflicting info. As posted above:

 

EDIT: from this article:

https://www.cbssports.com/nfl/news/n...ners-meetings/

“Per current league rules, all future fully guaranteed money due in a player contract must be placed in escrow at the time the deal is consummated. It's antiquated and has long been a bone of contention for the NFLPA. It was implemented long before the NFL became the 365-days-a-year revenue and content monster it is now, and it was put in place on the surface to prevent a team from defaulting on a contract to a player.”

 

 

“Fully guaranteed money” is not a fully guaranteed contract. It is that portion that is guaranteed. I’m just not sure what to believe and a bit confused over why this isn’t more clear. 

In that sense, I would guess fully guaranteed money would be (base salary, roster bonus and workout bonus) aka their cap hit.

 

The cap number is really the only number that the NFL uses when it comes to total dollars.  Which goes back to the concept that the cap isn't real because you can just keep pushing contracts out so that adds another level of complexity to it.

 

My guess is, they did need to put that money into escrow but at the same time, that money can be spread out at some point if they decide to restructure Watson once his later high guarantees are going to screw up their cap (thinking 2025 or 2026) and then that money in escrow will just get dropped into Watsons bank account as a bonus.

[aristocrat]

4 minutes ago, The Wiz said:

Without diving into the actual rule and when it was written, I would guess that Florio is just arguing the "legalese" of the rule.  With the "may" and "shall" statements.

 

The reason I say "when" it was written is based off a guess that it's possible that the NFL, before it became the cash cow that it is with billionaire owners, might have felt that they had to say "they may require them to put money into escrow" for owners that weren't as flush with cash as they are in todays NFL.

 

Also, I do not know if this only applies to fully guaranteed contracts or any guarantee in the contract (my guess is the prior).

So each team has roughly 200 mil in salary cap each year right? How much of that is guaranteed? So every year they have to deposit a certain amount in escrow based on guarantees on the roster.  It’s not like just the qbs get the huge guaranteed cash. Every player has a percentage