Heplays for theMemphis Grizzlies these days, but forward
Randolph is one of the few dozen major-sport athletes who in recent years have been willing to cash a portion of their salary or signing bonus at least a year after it was earned.
These deferrals occasionally arise as a point of contention in contract negotiations and will undoubtedly come up during baseball's current free-agency signing period. Fans seem to love deferrals when an expensive player takes one to help a team buy a quality player or two in the short term. But fans quickly change their tune when they realize a guy long gone is still cutting into their favorite team's payroll.
Yet despite the horror stories of players' running out of cashinretirement,deferred compensation is not very common.
Only one current
"You're dealing with young people who typically want that money in their possession," said football agent Kenny Zuckerman.
Randolph's agent, Beverly Hills-based Raymond Brothers, has persuaded two other clients out of his roster of 10 to accept deferred money.
"My thing is I like to have an automatic savings plan for the guy, so if the wheels fall off the bus, he'll have the money coming in," Brothers said. "If he gets another contract, he'll be even better off."
The latter is what happened with Randolph. He signedasix-year,$84-million extension with Portland at age 23 in 2004. But $25 million, or about 30%, was scheduled to be paid between 2012 and 2017. In 2011, he agreed to a four-year, $66- million deal with the Grizzlies. This time, he deferred $9.9 million, or about15%.
NBA's 2011 collective bargaining agreement limited deferrals to 25% of a player's salary. The NFL also has a maximum, 50%.
Deferred compensation appears tohavebeguninthe 1970s with the American Basketball Assn. As the league tried to steal top talent away fromthe NBA,it offered enormous salaries. But many of the deals were constructed to pay out in small chunks long into the future.
“In some ways, it’s not much different than a team taking out a loan to sign a star,” said Marc Edelman, who teaches sports law at
Around the same time in baseball, the advent of free agency led to a flood of contracts with deferred money as teams searched for ways to absorb larger and longer deals. Acceptance of the deferrals began to wane when teams wouldn't offer interest on the later payments.
The financial stability of teams also came into question. The
Lemieux converted the outstanding balance into a stake in the team, and only after he became the team's ownerdidhepullout someof what he had been owed.
Jeff Citron, a Toronto attorney who has advised on players' contracts, said Lemieux rolled the dice with a team that was in a tenuous situation.
"People may have learned their lessons a bit with those large sums and lost their appetite for deferrals," he said.
Doan sought a guaranteed signing bonus because of the looming
Several agents said that when NFL teams defer a payment, most often it's the signing bonus on deals struckinthe cash-poor early spring.
"Sometimes, they'll want to wait until April, May or June after getting early returns on season tickets," said agent Bob Lattinville.
Football teams pay salaries during the course of the regular season — with the
Many contract experts see deferrals as a bad deal for players in today's economy, except inspecial circumstances or when a player lacks the discipline to wisely manage his money.
On one hand, leagues funded by television rights fees are in better financial shape than ever. Spreading out payments over a longer period helps teams reduce their lines of credit, and money not spent now can be invested. Unfortunately for them, the way leagues count deferrals rarely helps teams with salary-cap or luxurytax concerns. Citing a policy of not discussing contracts, several teams contacted by The Times declined to comment.
For players, deferrals lessen the stress of shifting from a $1-million annual income to zero at retirement. Pensions and other forms of retirement benefits often don't kick in for several years. In the NFL, for example,players with at least four years of service collect annuity checks once they are 35 years old and out of the league for five years.
In cases of emergency, investors have monetized deferrals for players, though at a significant cost and only if teams are willing to buy insurance on the balance.
Deferring salaries also delays payments to agents and tax collectors. States such as California collect taxes fromathletesbasedon the number of days they spend working in the state, including as members of visiting teams. Players who deferred a significant portion of their salary a few years ago to this year must now swallow California's higher rates for high-income earners.
"No one wants to risk it with how aggressive the tax code has become," Creative Artists Agency's Lattinville said.
That's why in deals today in which both sides agree to a salarydeferral, talks might sour when deciding on an interest rate that protects a player from rising tax rates and inflation.
Several teams have been able to convince veterans to accept deferred money in new or restructured contracts as a way to make room for teammates.
Most famously, the
Though Bonilla might have lost out on the chance to grow the money himself, he has no complaints. "I had no need for it right away because I was never really crazy with my money," Bonilla said.