All these deferred money contracts....how do you feel?

[lcbj68c]

K-Rod's signing today contains $4M in deferred money which makes his base salary seem more than swallowable at $3.5M & $5.5M respectively. However, it seems more and more the Brewers are deferring money on their contracts. Braun, K-Rod, & Ramirez, IIRC. While it makes the annual salaries look good, eventually they'll be paying $10M + to guys that aren't even on the club. What's the point of this and do you see it being a problem for future fiscal health of the organization?

[Ennder]

Team salary is just going up so if you defer money you are saving money overall. It is probably a good thing overall.

[pete]

Lohse and Garza too I believe. I'm not sure what to think about it.

[bork]

Lohse has $7 million deferred over 3 years. And they are paying $5 million to Weeks and Gallardo in buyouts.

[RockCoCougars]

I trust Attanasio's financial judgements. The guy didn't become a mega millionaire by making poor decisions. I guarantee that their projected revenue increases allow for these moves. A million dollars today is worth far more than a million in four years. Also these are fairly low numbers being kicked around, at least relatively speaking. These aren't Bobby Bonilla/Mets type deals.

[Outlander]

As an accountant I can appreciate the time value of money but also not a big fan of paying an expense for an asset that has already been disposed. Bonilla is an extreme example but deferred expenses can get you in trouble in the real world, especially if revenue starts going in the opposite direction.

[Thurston Fluff]

Depends if it is deferred with interest and how long the deals are. If it is interest free (which I believe Braun's deferred money is) and a longer deal inflation would reduce the actual amount in real dollars.

[LouisEly]

As an accountant I can appreciate the time value of money but also not a big fan of paying an expense for an asset that has already been disposed. Bonilla is an extreme example but deferred expenses can get you in trouble in the real world, especially if revenue starts going in the opposite direction.

This. It's built on the assumption that revenues are going to increase, but it is exactly that - an assumption. Many homes were purchased a decade ago on the assumption that prices were going to keep going up. The real question though is how much other teams are doing this; if other teams are and MKE is at the average, then other teams will be in the same position.

 

I'm hoping that this is a sign that MA knows that expanded revenue sharing is coming sooner rather than later.

[JohnBriggs12]

I thought I read somewhere that within the industry they expect another huge windfall when the next national tv deal is done and that's helping fuel the mega deals and that would explain the Brewers deferring money in deals.

 

In this low interest rate/low inflation environment, the time value of money angle is fairly minimal. In the 1970's when inflation and interest rates were double digits, it was a huge factor. Not so much these days.

[Ennder]

They are working on expanding media sharing. The Brewer's team salary is going to go up before it goes down almost for sure.

[torts]

As an accountant I can appreciate the time value of money but also not a big fan of paying an expense for an asset that has already been disposed. Bonilla is an extreme example but deferred expenses can get you in trouble in the real world, especially if revenue starts going in the opposite direction.

 

well... that Bonilla is beyond an extreme example because it was tied to a Ponzi scheme... not at all similar to what is happening in Milwaukee. The only reason that deal was made was because the owner thought the return he was getting from Madoff was going to cover Bobby's deferrment.

[fondybrewfan]

Deferred contracts just seem like a normal business practice for pretty much all teams nowadays. I find nothing wrong with it so long as the money is deferred for only a small number of years and that it doesn't earn interest.

[monty57]

It basically means we're trying to fit someone into the budget today at the cost of not being able to add someone to a future year's payroll. If we have $5MM deferred in a year, that's $5MM worth of payroll that cannot be used to sign another player. As to the "increasing payroll" theory, salaries will certainly go up along with payroll, so just because your nominal payroll increases, it doesn't mean you can afford more real talent.

 

I think Attanasio is trying to get as much talent onto teams now as he can to have as big a chance of winning as possible, as he realizes they will eventually need to rebuild, so he's "making hay while the sun's shining."

 

Edit: to add to the nominal/real comment... the only way a team's increasing salary matters in a real sense is if it is increasing at a greater rate than (a) other teams, and/or (b) player salaries. Since we know that bigger markets' payrolls are expanding at a much greater rate than the Brewers' payroll, and they are driving up the price tag on good players, the nominal increase in payroll actually allows them to afford less "real" talent. Thankfully, the pre-arby years exist, and in baseball's inflationary environment, pre-arby players are just more and more greatly underpaid.

[DHonks]

I don't like it. I remember when the Dbacks bought a team on backloaded contracts, then paid Todd Stottlemeyer, Tony Womack, Matt Clark and other for several years after their 2001 World Series, resulting in pinched budgets

[SoupTown]

I would love to overpay one year, defer the money, then go into rebuild mode.... if we win a world series!