Watt 3/$124M with $108 Guaranteed

[Northern_Blitz]

The amount is an amount that will reach each guaranteed payment at the date it is due, after interest is calculated. As the post says, it guarantees the guaranteed money which is an amount invested today which will pay out when needed.

It says that it's "often" the present value of the future guarantees. But what discount rate would they be using? Since contracts are always < 5 years, do they have to put it in things like T-bills? Or are they allowed to invest in something that's going to appreciate more, but has more volatility? I always wonder what the actual payment schedules look like. I know some players have said they got their signing bonuses all in cash up front. And others have talked about getting SBs in installments. I wonder if other guarantees are treated that way too? Perhaps using that same so payments appreciate if they are paid after the year they are supposed to come due in the contract?

But it makes sense that it would "always" be this case instead of "often". Maybe unless the team and player came up with a specific agreement?

[WindyCitySteel]

It's not for lack of trying with QB.

It's that there is way more demand than supply.

I'd be more upset if they just had Kenny play out his rookie deal when it was clear he wasn't an NFL starter. I think they've generally taken reasonable steps since then.

I would have liked to have seen them try to go back to Fields at the end of last year and then make a bigger push to bring him back. But I don't think he's a long term starter either.

Are they trying to find a franchise QB or a safe game manager? Feels like they’re content with mediocre, safe QB play as long as the non-losing seasons keep rolling in.

[Eich]

It's not for lack of trying with QB.

It's that there is way more demand than supply.

I'd be more upset if they just had Kenny play out his rookie deal when it was clear he wasn't an NFL starter. I think they've generally taken reasonable steps since then.

I would have liked to have seen them try to go back to Fields at the end of last year and then make a bigger push to bring him back. But I don't think he's a long term starter either.

They did everything they possibly could to make sure Kenny failed IMO. Not that it was intentional - it was just bad. The line was terrible. The coordinator was the worst in the league. The weapons were weak.

I get that it's very difficult to find the next franchise QB. But what's the excuse for the line? The receivers that have come and gone? The zero pedigree coordinators (at least until maybe now)? A very highly paid defense that opposing teams keep saying it never changes?

We have failures all over the place, not just at the QB position.

I have very mixed feelings about Watt. He's the face of the defense, of the franchise, so I get the extension. But I don't love setting a compensation record with a 30 year old guy who keeps disappearing at the end of seasons, when the team overall is not even remotely competitive in the playoffs.

[hackjam]

Thanks.

Even though no specific details are provided re: the amount, I'm pretty confident this means I'm wrong. If the "specific amount" was 100%, I'm sure it would have said that here.

Maybe there's no detail here because it's complicated with different %ages depending on how far into the future it is?

Here's the language from the CBA:

Article 26, Section 9. Funding of Deferred and Guaranteed Contracts: The NFL may require that by a prescribed date certain, each Club must deposit into a segregated account the present value, calculated using the Discount Rate, less $15,000,000 (the “Deductible”), of deferred and guaranteed compensation owed by that Club with respect to Club funding of Player Contracts involving deferred or guaranteed compensation; provided, however, that with respect to guaranteed contracts, the amount of unpaid compensation for past or future services to be included in the funding calculation shall not exceed seventy-five (75%) percent of the total amount of the contract compensation. The present value of any future years’ salary payable to a player pursuant to an injury guarantee provision in his NFL Player Contract(s), shall not be considered owed by a Club under this Section until after the Club has acknowledged that the player’s injury qualifies him to receive the future
payments. The $15,000,000 Deductible referenced in the first sentence of this Section 9 shall apply to the 2020-28 League Years only. This Deductible shall increase to $17,000,000 for the 2029-30 League Years.

So for Watt's contract extenstion, the guarantees are as follows (this is the cash outlay, not the salary cap impact):

2025: $4MM Salary, $40MM signing bonus -> paid in current year so not subject to escrow
2026: $32MM Salary -> subject to escrow
2027: $32MM Salary -> subject to escrow
2028: No guaranteed money, therefore no escrow

So essentially, his 2026 and 2027 salaries ($64MM) are subject to escrow. Now, the team needs to fund the present value (PV) of those monies based on the discount rate mentioned above (this is set by the NFL) less the $15MM deductible.

Formula for Present Value:
PV = FV / (1 + DR)^n

where
FV = Future Value
DR = Discount Rate
n = num periods

For the sake of the example, let's assume the discount rate is 5%

So the calculation works out to:
2026: $32MM / ((1+0.05)^1) =$30.476MM
2027: $32MM / ((1+0.05)^2) =$29.0249MM

So the total amount they need to put into escrow is $30.476MM + $29.0249MM - $15MM = $44.501MM. In this example, if the rate of return on that money is less than the 5% discount rate, team has to cover the shortfall. But the team also gets to pocket the excess gains if the rate of return exceeds the discount rate. Note that I used years here for simplicity, they may get down to the day for accounting purposes.

So the team basically wrote Watt a check for $40MM and put another $44.5MM in an escrow account this week to fund the contract. The 2025 base salary ($4MM) and 2028 money (base salary + $15MM non-guaranteed roster bonus) will be funded appropriately and separately at those times.

[NorthCoast]

Here's the language from the CBA:

Article 26, Section 9. Funding of Deferred and Guaranteed Contracts: The NFL may require that by a prescribed date certain, each Club must deposit into a segregated account the present value, calculated using the Discount Rate, less $15,000,000 (the “Deductible”), of deferred and guaranteed compensation owed by that Club with respect to Club funding of Player Contracts involving deferred or guaranteed compensation; provided, however, that with respect to guaranteed contracts, the amount of unpaid compensation for past or future services to be included in the funding calculation shall not exceed seventy-five (75%) percent of the total amount of the contract compensation. The present value of any future years’ salary payable to a player pursuant to an injury guarantee provision in his NFL Player Contract(s), shall not be considered owed by a Club under this Section until after the Club has acknowledged that the player’s injury qualifies him to receive the future
payments. The $15,000,000 Deductible referenced in the first sentence of this Section 9 shall apply to the 2020-28 League Years only. This Deductible shall increase to $17,000,000 for the 2029-30 League Years.

So for Watt's contract extenstion, the guarantees are as follows (this is the cash outlay, not the salary cap impact):

2025: $4MM Salary, $40MM signing bonus -> paid in current year so not subject to escrow
2026: $32MM Salary -> subject to escrow
2027: $32MM Salary -> subject to escrow
2028: No guaranteed money, therefore no escrow

So essentially, his 2026 and 2027 salaries ($64MM) are subject to escrow. Now, the team needs to fund the present value (PV) of those monies based on the discount rate mentioned above (this is set by the NFL) less the $15MM deductible.

Formula for Present Value:
PV = FV / (1 + DR)^n

where
FV = Future Value
DR = Discount Rate
n = num periods

For the sake of the example, let's assume the discount rate is 5%

So the calculation works out to:
2026: $32MM / ((1+0.05)^1) =$30.476MM
2027: $32MM / ((1+0.05)^2) =$29.0249MM

So the total amount they need to put into escrow is $30.476MM + $29.0249MM - $15MM = $44.501MM. In this example, if the rate of return on that money is less than the 5% discount rate, team has to cover the shortfall. But the team also gets to pocket the excess gains if the rate of return exceeds the discount rate. Note that I used years here for simplicity, they may get down to the day for accounting purposes.

So the team basically wrote Watt a check for $40MM and put another $44.5MM in an escrow account this week to fund the contract. The 2025 base salary ($4MM) and 2028 money (base salary + $15MM non-guaranteed roster bonus) will be funded appropriately and separately at those times.

Good post and explanation. So roughly 1/3 of the contract came out of Rooney's pocket this year. Far less than the $108M guaranteed.

[feltdizz]

They did everything they possibly could to make sure Kenny failed IMO. Not that it was intentional - it was just bad. The line was terrible. The coordinator was the worst in the league. The weapons were weak.

I get that it's very difficult to find the next franchise QB. But what's the excuse for the line? The receivers that have come and gone? The zero pedigree coordinators (at least until maybe now)? A very highly paid defense that opposing teams keep saying it never changes?

We have failures all over the place, not just at the QB position.

I have very mixed feelings about Watt. He's the face of the defense, of the franchise, so I get the extension. But I don't love setting a compensation record with a 30 year old guy who keeps disappearing at the end of seasons, when the team overall is not even remotely competitive in the playoffs.

agreed.. Canada was a joke and the scheme was comical.

[Northern_Blitz]

Are they trying to find a franchise QB or a safe game manager? Feels like they’re content with mediocre, safe QB play as long as the non-losing seasons keep rolling in.

What opportunities did they have to get a franchise QB in the last two years? I think we probably made the best moves we could have at QB in the last couple years. And avoided stupid things like trading lots of picks for someone like Cousins.

Pretty clear that they're going to pick a QB early next year. And that they've been setting the table (fixing the lines) in the last few years.

Probably what we should have been doing after Bell / Brown left. But we kept wanting to give Ben new toys (e.g. Najee and PF).

I know that you want us to tank. But it's 100% against the mission statement of the team.

[Northern_Blitz]

Here's the language from the CBA:

Article 26, Section 9. Funding of Deferred and Guaranteed Contracts: The NFL may require that by a prescribed date certain, each Club must deposit into a segregated account the present value, calculated using the Discount Rate, less $15,000,000 (the “Deductible”), of deferred and guaranteed compensation owed by that Club with respect to Club funding of Player Contracts involving deferred or guaranteed compensation; provided, however, that with respect to guaranteed contracts, the amount of unpaid compensation for past or future services to be included in the funding calculation shall not exceed seventy-five (75%) percent of the total amount of the contract compensation. The present value of any future years’ salary payable to a player pursuant to an injury guarantee provision in his NFL Player Contract(s), shall not be considered owed by a Club under this Section until after the Club has acknowledged that the player’s injury qualifies him to receive the future
payments. The $15,000,000 Deductible referenced in the first sentence of this Section 9 shall apply to the 2020-28 League Years only. This Deductible shall increase to $17,000,000 for the 2029-30 League Years.

So for Watt's contract extenstion, the guarantees are as follows (this is the cash outlay, not the salary cap impact):

2025: $4MM Salary, $40MM signing bonus -> paid in current year so not subject to escrow
2026: $32MM Salary -> subject to escrow
2027: $32MM Salary -> subject to escrow
2028: No guaranteed money, therefore no escrow

So essentially, his 2026 and 2027 salaries ($64MM) are subject to escrow. Now, the team needs to fund the present value (PV) of those monies based on the discount rate mentioned above (this is set by the NFL) less the $15MM deductible.

Formula for Present Value:
PV = FV / (1 + DR)^n

where
FV = Future Value
DR = Discount Rate
n = num periods

For the sake of the example, let's assume the discount rate is 5%

So the calculation works out to:
2026: $32MM / ((1+0.05)^1) =$30.476MM
2027: $32MM / ((1+0.05)^2) =$29.0249MM

So the total amount they need to put into escrow is $30.476MM + $29.0249MM - $15MM = $44.501MM. In this example, if the rate of return on that money is less than the 5% discount rate, team has to cover the shortfall. But the team also gets to pocket the excess gains if the rate of return exceeds the discount rate. Note that I used years here for simplicity, they may get down to the day for accounting purposes.

So the team basically wrote Watt a check for $40MM and put another $44.5MM in an escrow account this week to fund the contract. The 2025 base salary ($4MM) and 2028 money (base salary + $15MM non-guaranteed roster bonus) will be funded appropriately and separately at those times.

Thanks Hackjam. This agrees with what TO was saying upthread (and shows again that I was wrong...essentially assuming that the discount rate was 0%).

Since the timeframe will always be < 5 years, I wonder if they are forced to put the escrow money in "safe" investments like T-bills / money markets so that the principle is protected (and the discount rate is low).

Since it's money for the players, my guess is that the CBA doesn't allow them to invest in something relatively volatile like the SP500 where it's possible that the market drops in the short time frame.

[Troy43]

My God. Some of these posts are so negative. Get a grip on life. Be happy for him. He is still in his prime.

Exactly

If you aren't going to pay someone who has produced a Hall of Fame career. Then who will you pay ?

[Troy43]

The radio hosts defending this with the “they’re 1- They’re so dependent on TJ because they’ve botched the QB position so badly and are forced to compete in low-scoring rock fights. That argument is an indictment on team building.

Can't really argue that.

[hawaiiansteel]

agreed.. Canada was a joke and the scheme was comical.

I do hold Tomlin responsible for not only hiring Canada in the first place but especially keeping him for as long as he did.

[Eich]

I do hold Tomlin responsible for not only hiring Canada in the first place but especially keeping him for as long as he did.

I'd have to think a guy like Brock Purdy would have done not much better than Pickett, given the same coordinator, the same line and the same weapons and the same offensive philosophy.

We have a defensive-minded head coach who's not looking to build an innovative offense. And he consistently runs a defense that has become widely known as predictable. If we're not getting to the QB consistently, we're toast.

The only way I see us winning a playoff game again under Tomlin is if we luck into bringing in enough road graders to impose our will. Otherwise, we're not out-scheming anyone. And we don't a have a super hero QB who can make something out of nothing when the play breaks down.

[Captain Lemming]

See the post about cap % being funny money. It's the cash spend that is real. Remember, a team has to put the guaranteed portion in an escrow account. This means Rooney has no access or interest bearing on $108M dollars for 3 years. I don't know about you, but that would be a tough swallow for me.

Cap is all I care about not Rooney money. In my opinion, fan perspective on cap spending is whether it handcuffs our total cap. I hear we STILL got money to spend so I’m not hating on it.
All those moves make clear we are pushing all the chips in. Amazingly, we are doing it without completely mortgaging the future.

We are trying to pull Ramsesque SB run. I’m all for it.

[Captain Lemming]

I'd have to think a guy like Brock Purdy would have done not much better than Pickett, given the same coordinator, the same line and the same weapons and the same offensive philosophy.

If that were true the Niners could have traded for and sign Pickett for peanuts and have that 265 million they are scheduled to pay Purdy to surround Pickett with even more talent. Yet the folks making that decision paid the man. Wouldn’t such an offensive genius know Purdy could be easily replaced as a product of his system?

[hawaiiansteel]

The T.J. Watt deal's a bargain