Author Topic: Who Wants To Win  (Read 2804 times)

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Offline nfotiu

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Re: Who Wants To Win
« Reply #75 on: August 01, 2024, 10:15:27 pm »
After the Ohtani contract was announced, they said that the CBA requires the team to put the present value of the amount owed into an escrow account during the service year it is earned.   The deferred money should have no impact at all on current cash flows.
And another thing.   Interest rates are way higher than when these service years were paid.   They are actually making money off these deferrals every year, and the actual return vs expected return is a source of revenue for each year's budget.

Offline varoadking

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Re: Who Wants To Win
« Reply #76 on: August 02, 2024, 09:31:25 am »
After the Ohtani contract was announced, they said that the CBA requires the team to put the present value of the amount owed into an escrow account during the service year it is earned.   The deferred money should have no impact at all on current cash flows.

May still be this way, but investment interest earned while in escrow, unless otherwise agreed upon, belonged to the recipient of the escrowed amount...which means in years 1-10, Ohtani would have gotten investment income on an average balance of say $340MM each year.  I'd gladly take the maybe 5% or better on that each year and call it a day...

Hope my math assumptions are correct...and of course, this went into effect after Ohtani's deal went down, but still...

Offline IanRubbish

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Re: Who Wants To Win
« Reply #77 on: August 02, 2024, 01:28:48 pm »
And another thing.   Interest rates are way higher than when these service years were paid.   They are actually making money off these deferrals every year, and the actual return vs expected return is a source of revenue for each year's budget.

It's in the '22 CBA, which doesn't apply to the Nats deferrals.  Moreover, that CBA specified a 5% discount rate to calculate the NPV independent of market rates.   Separately, Strasburg's contract has a separate provision that pays him $4 million in interest after all other deferrals are paid in 2029, effectively lifting the NPV close to the actual cash payouts.

Where it does apply, the escrow has to be put in place on July 1 two seasons after the salary was earned.   

Offline nfotiu

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Re: Who Wants To Win
« Reply #78 on: August 02, 2024, 02:14:15 pm »
It's in the '22 CBA, which doesn't apply to the Nats deferrals.  Moreover, that CBA specified a 5% discount rate to calculate the NPV independent of market rates.   Separately, Strasburg's contract has a separate provision that pays him $4 million in interest after all other deferrals are paid in 2029, effectively lifting the NPV close to the actual cash payouts.

Where it does apply, the escrow has to be put in place on July 1 two seasons after the salary was earned.   

The terms you are listing are correct, it seems.   But this requirement has been around for a while.

See the 2017-2021 CBA

Quote
Deferred compensation obligations incurred in a Contract executed on or after September 30, 2002 must be fully funded by the Club, in an amount equal to the present value of the total deferred compensation obligation, on or before the second July 1 following the championship season in which the deferred compensation is earned. For purposes of this Article XVI, full funding of the present value of deferred compensation obligations shall mean that the Club must have funded, for the duration of and without interruption in each year, the current present value of the then outstanding deferred payments, discounted by 5% annually. If the prime interest rate in effect at The J.P. Morgan Chase Bank on the immediately preceding November 1 is 7% or higher, the Parties shall meet and confer regarding this Article XVI discount rate and may, with due notice to the Clubs, amend such discount rate effective the next succeeding July 1.

https://www.dol.gov/sites/dolgov/files/olms/regs/compliance/cba/2019/private_/30majorclubs_k9831_060122.pdf

So Max's deferments should be fully funded and off the books.

I think Corbin deferral was from early in his contract, so he should be off the books next year as well.

It should just be Strasburg's money that is still on future years' budgets.