An uncapped year discussion

[solman]

Let's give an example of how one take ADVANTAGE of an uncapped year. There seems to be some perception here that some are advocating that Kraft go wild in free agency by spending obscene amounts. Instead, we are counseling some creative accounting.

Mankins, Seymour, Wilfork are the big 3 for next year, with Mankins being less of a priority because of his position.

Let's just assume, for simplicity sake, that Wilfork will agree to a contract of $10 million per year for 4 years, but he wants half up front.

Normally, that would mean $5 million in bonus + salary counted against the cap each and every year, with the salary not rising more than 30%.

Now, if you're signing contracts in an uncapped year, you can guarantee the bonus as salary. This is what Wilfork's deal might look like.

He wants $20 million in the first year, right? So...

Year 1: $15 million salary + $5 million signing bonus
Year 2: $5.7 million salary
Year 3: $6.7 million salary
Year 4: $7.7 million salary

Cap impact:

Year 1: uncapped
Year 2: $7.4 million
Year 3: $8.4 million
Year 4: $9.4 million

You've essentially saved yourself $10 million of cap space in later years.

Exactly right. Two caveats:

1. If the player is suspended or otherwise unable to fulfill his contract after the first year, you can't get back the money spent in this manner.

2. The next CBA hasn't been written yet. It can easily be written to count money from early years against the cap in latter years. If many owners pull this sort of crap, Goodell is likely to insist on this. (Of course the union can insist on not doing this, but no deal means no football).

 

[signbabybrady]

Let's give an example of how one take ADVANTAGE of an uncapped year. There seems to be some perception here that some are advocating that Kraft go wild in free agency by spending obscene amounts. Instead, we are counseling some creative accounting.

Mankins, Seymour, Wilfork are the big 3 for next year, with Mankins being less of a priority because of his position.

Let's just assume, for simplicity sake, that Wilfork will agree to a contract of $10 million per year for 4 years, but he wants half up front.

Normally, that would mean $5 million in bonus + salary counted against the cap each and every year, with the salary not rising more than 30%.

Now, if you're signing contracts in an uncapped year, you can guarantee the bonus as salary. This is what Wilfork's deal might look like.

He wants $20 million in the first year, right? So...

Year 1: $15 million salary + $5 million signing bonus
Year 2: $5.7 million salary
Year 3: $6.7 million salary
Year 4: $7.7 million salary

Cap impact:

Year 1: uncapped
Year 2: $7.4 million
Year 3: $8.4 million
Year 4: $9.4 million

You've essentially saved yourself $10 million of cap space in later years.

And from Krafts perspective he winds up spending 10 million more on talent why does he want to do this when he can pocket the ten mil if he works like he usually does? sure he wants to win SBs but does he want to bye them or spend within limits.....again I am sure to some extent he would take advantage but if he saves 10 mil like that (keep in mind it would persumably be saved on future cap which he would than use so he spends 10 mil more this way) he could in an uncapped world do this as many times as he wanted with their own FAs so if he did this with Seymour, Wilfork, Mankins, he in theory could free up to 30 mil but it doesnt come out of no where it comes out of Krafts pocket.

 

[PatsWickedPissah]

And from Krafts perspective he winds up spending 10 million more on talent why does he want to do this when he can pocket the ten mil if he works like he usually does? sure he wants to win SBs but does he want to bye them or spend within limits.....again I am sure to some extent he would take advantage but if he saves 10 mil like that (keep in mind it would persumably be saved on future cap which he would than use so he spends 10 mil more this way) he could in an uncapped world do this as many times as he wanted with their own FAs so if he did this with Seymour, Wilfork, Mankins, he in theory could free up to 30 mil but it doesnt come out of no where it comes out of Krafts pocket.

Huh? Krafts spends the same $40M either way.
The difference to him is CASH FLOW. He needs $20M up front vs say $10M to get the cap savings of $10M. (I ignored interest rate time value of money nuance to simplify the point) This cash flow business is why cash poor owners like Ralph Wilson will get hammered in an uncapped year. They don't have the finances to take advantage.

I re-read and see your point about how in the 'future' he'll send the cap savings as 'extra' money on a player. Kraft wants to field a Championship team and based upon what he's done so far I think he will spend a few million extra to insure success. Not Steinbrenner crazy but a few million to preserve the dynasty.

 

[mgteich]

Actually, I don't think that there is even a cach flow difference, just a cap difference. In a capped world, Wilfork would require the same $20M guaranteed. In an capped world, the salary might be $5M and the bonus $15M. Kraft's cash flow is exactly the same.

Huh? Krafts spends the same $40M either way.
The difference to him is CASH FLOW. He needs $20M up front vs say $10M to get the cap savings of $10M. (I ignored interest rate time value of money nuance to simplify the point) This cash flow business is why cash poor owners like Ralph Wilson will get hammered in an uncapped year. They don't have the finances to take advantage.

I re-read and see your point about how in the 'future' he'll send the cap savings as 'extra' money on a player. Kraft wants to field a Championship team and based upon what he's done so far I think he will spend a few million extra to insure success. Not Steinbrenner crazy but a few million to preserve the dynasty.

 

[PatsWickedPissah]

Actually, I don't think that there is even a cach flow difference, just a cap difference. In a capped world, Wilfork would require the same $20M guaranteed. In an capped world, the salary might be $5M and the bonus $15M. Kraft's cash flow is exactly the same.

I stand corrected. You are right. DUH!

 

[upstater1]

And from Krafts perspective he winds up spending 10 million more on talent why does he want to do this when he can pocket the ten mil if he works like he usually does? sure he wants to win SBs but does he want to bye them or spend within limits.....again I am sure to some extent he would take advantage but if he saves 10 mil like that (keep in mind it would persumably be saved on future cap which he would than use so he spends 10 mil more this way) he could in an uncapped world do this as many times as he wanted with their own FAs so if he did this with Seymour, Wilfork, Mankins, he in theory could free up to 30 mil but it doesnt come out of no where it comes out of Krafts pocket.

In the above scenario, we've already agreed to give Vince a $20 million in the first year.

By making $15 million guaranteed in the first year, we don't have to carry over the $20 million signing bonus into future years. Instead, the carryover would be $5 million. Again, this has nothing to do with how much money Kraft is paying out to Vince Wilfork. It's the same exact money, except the BONUS is counted differently.

I've said this a number of times in this thread, as have others.

I see your point about signing say a FA (or maybe paying Brady what he deserves!!) with excess cap space in the future. But are you assuming that Kraft wouldn't have spent more to the cap anyway if it was larger in past years? I know he has a budget, but we're getting very close to the time when Tom Brady is going to cash out. Kraft OWES Brady bigtime.

 

[upstater1]

Exactly right. Two caveats:

1. If the player is suspended or otherwise unable to fulfill his contract after the first year, you can't get back the money spent in this manner.

2. The next CBA hasn't been written yet. It can easily be written to count money from early years against the cap in latter years. If many owners pull this sort of crap, Goodell is likely to insist on this. (Of course the union can insist on not doing this, but no deal means no football).

Other than Terry Glenn, we haven't had a situation like a suspension in New England. It's pretty rare, no?

 

[upstater1]

The confused smiley was supposed to indicate my impression of Haynesworth's contract.

But its still a valuable point. Guaranteed or upfront money can prove disastrous if the player fails to perform. Dan Snyder is a moron for signing the Haynesworth deal. The risks of him going to jail (from one of his many automotive escapades); getting injured (on the field or off); getting kicked out of the league (for conduct on or off it); or just plain slacking off (Because he has little financial incentive moving forward) are enormous. Add to that the ever present possibility that his skills diminish, and signing this deal was flat out unintelligent.

Many owners, Kraft included, are not going to give huge upfront money to the many players who can't be trusted to live up to it.

Well, that risk would be there with a large signing bonus as well, one that is carried over in cap years.

The only difference, as you said in a later post, is that sometimes the signing bonus can be recovered, as in Michael Vick's case.

But if a player slacks off, and you've paid him a signing bonus, there's nothing you can do about it. So, for the vast majority of players, there is no difference between paying the money as a signing bonus, or paying it as guaranteed salary. Still the same amount of money. You still can't recover it if the player becomes a slacker.

 

[nabwong]

The whole salary cap thing is a big irony to me in the land of the free market.

 

[Deus Irae]

The whole salary cap thing is a big irony to me in the land of the free market.

This nation hasn't been a free market nation for a long, long time.

 

[eom]

The whole salary cap thing is a big irony to me in the land of the free market.

the idea isn't for teams to try to put each other out of business.

if you simply wanted survival of the fittest, the nfl would get kind of dull when only one team was left.

 

[nabwong]

This nation hasn't been a free market nation for a long, long time.

Sure..more keynesian... but still... everyone preaches free market but somehow agrees that sports should be capped. Spreading the wealth around... hmm... the S word... just very hypocritical.

Btw, I don't lean one way or the other... except I think rookies in the top 10 are earning too much..... just bringing up a thought...

 

[BTTA]

About 4 months ago an NFL GM told me that the owners were completely unprepared for this as a group, although he suspected that many were making plans for how their teams would react individually. There were also no plans in place to create a strategy. That may have changed since then, as we haven't chatted since then.

 

[fgssand]

About 4 months ago an NFL GM told me that the owners were completely unprepared for this as a group, although he suspected that many were making plans for how their teams would react individually. There were also no plans in place to create a strategy. That may have changed since then, as we haven't chatted since then.

Make a point, if you can, to talk to this GM after the NFL owners meeting....it will be very interesting to hear what he tells you versus the spin from media, owners and players assoc.

 

[BTTA]

Make a point, if you can, to talk to this GM after the NFL owners meeting....it will be very interesting to hear what he tells you versus the spin from media, owners and players assoc.

I'd love to, but probably won't have the opportunity. He's a very good friend of a very good friend, but we live 800 miles apart.

 

[upstater1]

Sure..more keynesian... but still... everyone preaches free market but somehow agrees that sports should be capped. Spreading the wealth around... hmm... the S word... just very hypocritical.

Btw, I don't lean one way or the other... except I think rookies in the top 10 are earning too much..... just bringing up a thought...

I don't want to get into politics too much, but one of the free-est markets ever was the Medeval feudal system. There was no oversight on the feudal overlords. The NFL is like anything else. They've realized that you grow your product and your wealth with parity, and that means institutionalizing some of the sharing that will help the whole entity earn more money.

We do this all the time in America. We subsidize schools with taxes with the idea that a more educated populace translates into a wealthier populace. if schools made us poorer, then the free market would advise getting rid of schools.

 

[Frezo]

If next season is uncapped, can players be released mid contract without any cap concerns?

 

[mgteich]

We are in really fine shape for an uncapped 2010:
---------------------------
Wilfork can be franchised.
Seymour can be franchised.
Mankins can be tendered requiring 1 firsts as compensation.
Hobbs can be tendered requiring 2 firsts as compensation.
We can decide on how high to tender Kaczur, Woods and LeKevin Smith.\
That leaves Green and Faulk who are candidates for extensions.

 

[solman]

If next season is uncapped, can players be released mid contract without any cap concerns?

Yes; provided that the new CBA doesn't somehow account for this (I will be surprised if it does).


The Redding for Peterson deal that just got completed is the exact opposite of this. The Lions (and possibly the Seahawks) are assuming that 2010 will be uncapped. They are therefore accelerating amortized salary from 2010 and beyond into 2009, allowing them to meet the minimum 2009 salary while spending less real money.

This is a very strong indication that the Lions:

1. Expect 2010 to be uncapped and

2. Will consider going below the current minimum salary in 2010


If memory serves, the Lions are owned by a family with strong ties to a local business of questionable financial solvency.

Dumping salary seems like a smart move.

 

[solman]

We are in really fine shape for an uncapped 2010:
---------------------------
Wilfork can be franchised.
Seymour can be franchised.
Mankins can be tendered requiring 1 firsts as compensation.
Hobbs can be tendered requiring 2 firsts as compensation.
We can decide on how high to tender Kaczur, Woods and LeKevin Smith.\
That leaves Green and Faulk who are candidates for extensions.

Only one player can be franchised.

Wilfork's tag is much less expensive, and should be used if an agreement can not be reached.

I've always felt that Seymour was headed somewhere else after this season. If we are subject to the final 8 plan, this will at least allow us to be players in free agency.

I do not believe there are any CBA provisions that would allow us to tender Hobbs using two firsts, even in an uncapped year.


I still agree with the ultimate conclusion, that we are in good shape for an uncapped year (or at least better shape if 2010 is uncapped than if it is capped), but I think your plan runs astray of the CBA.