The Elephant In The Room - Moving Costs Into The Future

[mgteich]

Some folks think that it's terrible to move costs into the future. After all, we have 2 top players to sign/extend next year (Hightower and Jones). I could say that we have McCourty, Solder and Vereen in the same situation this year, but that would be somewhat off point.
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Pushing money significant money into the future is standard operating procedure for all teams in the NFL, including the patriots. Obviously, some teams do this more than others, by having huge cap hits for non-productive players. The patriots do NOT do this.
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Whenever a contract with a signing bonus is executed, money is moved into the future. A $21M bonus on a 3 year contract moved $14M into the future. That's just a arithmetic. Teams somewhat reduce this effect by having first year salaries be minimum, say $1M. So, we might sign Revis for 3/$45M with a $21M bonus. How much should the first year salary be? Some say $1M, some say $3M, but it really should't be more than that.

The other time money is moved into the future is when a players is cut and the team doesn't absorb all the remaining bonus money in the year he was cut. For example, we have $4M in 2015 for Mankins, pushed forward from 2014.
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Per Miguel's sheets, we currently have $37M in the 2015 cap pushed forward from past years ($33M in bonuses from the past, and $4M from Mankins). I did not count the bonuses from the four new extensions.
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When we sign McCourty, say to a 5 year $47M contract, with a $20M bonus, how much would the 2015 cap hit be. I would guess that it would be somewhere between $5M and $7M (with a 2015 salary of between $1M and $3M). I'll guess $1M. The salaries would then be $1M, 5M, 6M, 7M, 8M. The 2015 cap hit would be $5M. I didn't list what money was guaranteed for injury or performance.
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So, I don't worry about Hightower and Jones in 2016, or Collins in 2017. After all this is all normal, no different that McCourty, Solder and Vereen this year. We will NOT be bankrupting the future by signing 2015 contracts with significant signing bonuses.

 

[Bruins29]

Oh sorry. I thought this was about Warren Sapp's hotel bill.

 

[micronin127]

Well... we have 3 years left on Tom Brady's current contract. And a need to have a talented team to give ourselves a chance at more championships. The team will strike a balance, this year they made $10 million of Revis' money a signing bonus to move 5 million into 2015. They also traded Mankins because they felt he was overpaid.

So, they will restructure players that are "keepers", like Brady, and move money into future years.

They will probably also make some difficult decisions too.

 

[Fencer]

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Whenever a contract with a signing bonus is executed, money is moved into the future. A $21M bonus on a 3 year contract moved $14M into the future. That's just a arithmetic. Teams somewhat reduce this effect by having first year salaries be minimum, say $1M. So, we might sign Revis for 3/$45M with a $21M bonus. How much should the first year salary be? Some say $1M, some say $3M, but it really should't be more than that.

The other time money is moved into the future is when a players is cut and the team doesn't absorb all the remaining bonus money in the year he was cut. For example, we have $4M in 2015 for Mankins, pushed forward from 2014.

That first paragraph is rather confused.

There are two kinds of money -- cap hit and cash. Cap hit is the one that the "moving into the future" discussion should be about, since the rules mandate that cap hits be close to level from year to year, while cash payouts can fluctuate all over the place. Not coincidentally, almost everybody understands that "moving costs into the future" is about cap hits.

Thus, your example of an amortized bonus is a bad one. Consider a case in which a player is paid $2 million/year salary plus $7 million/year bonus. Then the cap hit is $9 million each year, and this is NOT an example of moving costs into the future.

Consider however a case in which a player is paid unequal salaries every year. Then his cap hits might be, for example, $5 million the first year, $14 million the second year, and $14 million the third year, for and average hit of $11 million per year. Then this would be an example of moving $5-6 million in cap hits from the first year to the later ones (I'm giving a range to account for varying assumptions about annual growth in the cap amount).

 

[mgteich]

I think that we both understand the cap. Let us use a 5/$43M contract for McCourty with a $20M bonus as an example. I think that salaries of $1M,$4M,$5M,$6M,$7M would make up a reasonable structure. The team and McCourty can argue about the guarantees. Moving the total to 5/$48M and a $25M bonus doesn't change the discussion much.

Do you agree?

The cap hits would be $5M, $8M,$9M,$10M,$11M.

Or do you think it reasonable or necessary to add another $2M to the 2015 salary (taking it off later) to levelize the cap hits.
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Your example with low salaries for the first two years is used for 2-part contracts. Sometimes, this is made obvious with a bonus in the 3rd year. I think of these as sort of fake contracts. They are 2-year contracts masquerading as a 4 or 5 year contract. In a sense, we had one of these with Revis last year. The contract was really a one-year $12M contract with no right to franchise.

That first paragraph is rather confused.

There are two kinds of money -- cap hit and cash. Cap hit is the one that the "moving into the future" discussion should be about, since the rules mandate that cap hits be close to level from year to year, while cash payouts can fluctuate all over the place. Not coincidentally, almost everybody understands that "moving costs into the future" is about cap hits.

Thus, your example of an amortized bonus is a bad one. Consider a case in which a player is paid $2 million/year salary plus $7 million/year bonus. Then the cap hit is $9 million each year, and this is NOT an example of moving costs into the future.

Consider however a case in which a player is paid unequal salaries every year. Then his cap hits might be, for example, $5 million the first year, $14 million the second year, and $14 million the third year, for and average hit of $11 million per year. Then this would be an example of moving $5-6 million in cap hits from the first year to the later ones (I'm giving a range to account for varying assumptions about annual growth in the cap amount).

 

[RI Patriots fan]

I noticed that you didn't work out the numbers when I mentioned 2016. You just made a vague reference to this being "normal". The devil is always in the details.

So lets look at the actual numbers:

1.) starting point of $113M including Hightower and Jones - 30 players
2.) Revis - 2016 cap hit
3.) McCourty - 2016 cap hit
4.) Ghost - 2016 cap hit
5.) Vereen - 2016 cap hit
6.) Ayers - 2016 cap hit
7.) Connolly - 2016 cap hit
8.) Solder- 2016 restructured cap hit

Total =

Ok, so the total you come to must also account for 16 more players, any IRs during the year, the practice squad, draft picks, and any incentives.

Show me the numbers. What are those 2016 cap hits going to be for each player?

 

[mgteich]

I have not done a long term cap plan. I don't thins anyone here has done so. If Miguel and others are interested, we could do so.

I noticed that you didn't work out the numbers when I mentioned 2016. You just made a vague reference to this being "normal". The devil is always in the details.

So lets look at the actual numbers:

1.) starting point of $113M including Hightower and Jones - 30 players
2.) Revis - 2016 cap hit
3.) McCourty - 2016 cap hit
4.) Ghost - 2016 cap hit
5.) Vereen - 2016 cap hit
6.) Ayers - 2016 cap hit
7.) Connolly - 2016 cap hit
8.) Solder- 2016 restructured cap hit

Total =

Ok, so the total you come to must also account for 16 more players, any IRs during the year, the practice squad, draft picks, and any incentives.

Show me the numbers. What are those 2016 cap hits going to be for each player?

 

[Fencer]

The cap hits would be $5M, $8M,$9M,$10M,$11M.

Or do you think it reasonable or necessary to add another $2M to the 2015 salary (taking it off later) to levelize the cap hits.

I certainly think it is reasonable.

It is not necessary in EVERY case. However, the missing $2 million or whatever is indeed a drag on the future for the benefit of the present. Hence the total of all those figures needs to be managed carefully.

And by the way, even if the cap figures (on a slightly bigger contract than in your example) were $7, $8, $9, $10, $11 million in consecutive years, there would be some mortgaging of the future. The cap is unlikely to grow by 4/7 over 4 years. Further, he may be on the decline by the end of that contract.

 

[RI Patriots fan]

I have not done a long term cap plan. I don't thins anyone here has done so. If Miguel and others are interested, we could do so.

And that is exactly my point.......every "restructure" we make will adversely affect future cap years. Let's do this real quick:

$113M to start in 2016 (30 players including Jones and Hightower)

Revis - $14M in 2016 (and I think that's way too low given that the cap hit would be $11M in 2015)
McCourtey - $8M in 2016 (your number)
Solder - $9M in 2016 (I think this is fair given your $5 cap hit in 2015)
Ghost - $5M in 2016 (Given that his cap hit was almost $4M in 2014)

So if you add all those cap hits up we have $149M in cap hit for 2016 and we still haven't accounted for Vereen, DC, or Ayers along with 16 additional players, IR replacements, draft picks, incentives, and practice players.

You can't just look at one year of cap. Cap management is a multi-year project.

 

[mgteich]

Let's see some parameters. Of course, we do not know the or the carry-overs.
$150M cap
($113M) which includes $8M for Hightower and $8M for Jones.
($3M) for Chung and Bolden
($12M) for 23 players
($6M) for rookies, IR etc. (this is the usual net used)
($2M) for additional amount for 2015 rookies
$6M added to reflect the fact that 1st year of Hightower and Jones will be $5M each
$2M DA not included (since DA's hit is much more, there is money for an added WR)
($7M) McCourty
($8M) Solder
($4M) Gostkowski
($3M) Connolly or other veteran lineman
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even with 53 players, and everything accounted for. The roster includes this and next year's ERFA's and rookies, and even Ryan (RFA) and a a LS (no real added cost).

CONCLUSION
For Revis to be signed, cap monies will need to be found in 2016.

I noticed that you didn't work out the numbers when I mentioned 2016. You just made a vague reference to this being "normal". The devil is always in the details.

So lets look at the actual numbers:

1.) starting point of $113M including Hightower and Jones - 30 players
2.) Revis - 2016 cap hit
3.) McCourty - 2016 cap hit
4.) Ghost - 2016 cap hit
5.) Vereen - 2016 cap hit
6.) Ayers - 2016 cap hit
7.) Connolly - 2016 cap hit
8.) Solder- 2016 restructured cap hit

Total =

Ok, so the total you come to must also account for 16 more players, any IRs during the year, the practice squad, draft picks, and any incentives.

Show me the numbers. What are those 2016 cap hits going to be for each player?

 

[micronin127]

I guess there is a combination of short and long term planning. I am not assuming that everyone will be back. We will have draft picks in 2015 and 2016 that will displace veterans and there is the unknown element of the value the team places on positions and players.

Decision 1: Meet Revis' demands? This is a case where the player has the leverage because if he does nothing and the team keeps him a 1 year/20 million deal kicks in. So... the player has the leverage and will probably use it.

Decision 2: Sign or tag McCourty. The tag requires 9.5 million in cap space and we are 3.9 million over the cap based on assumptions from Miguel. So we have to clear 13.4 million just to be able to use the franchise tag. We need anywhere from 5 to 9 million to account for the 1st year of a long-term deal.

Decision 3: What to do with Wilfork and Solder. Do you move 2015 money into 2016 with Wilfork? Do you feel Solder is worth 7.5 million guaranteed?

I assume a Mayo restructure and a Brady restructure.

Free agents most at risk of not returning: Vereen (too valuable league wide to get back cheaply) and Gostkowski (does the organization value the position of kicker enough to pay 4-5 million?)

 

[patsfan13]

Fortunately the Pats have people as talented as Miguel (hat tip) to deal with this stuff and are planning a couple of years into the future.

However thanks to Miguel we can at least have intelligent conversations about the roster unlike most fan bases.

 

[billdog3484]

Wilfork is not a tough decision in my opinion. He's not coming back at 8m

 

[Love The Drake]

I wouldn't go higher than 2 million a season for Wilfork.
3.5 Million for Mayo.
2 Million for Ayers
1.5 for Castillas
Mccourty 8 to 9 million a season
Ridley 1 year 1.5 Million
Vareen 3 years 7 Million

 

[RobertWeathers]

Good post. Some thoughts...

I guess there is a combination of short and long term planning. I am not assuming that everyone will be back. We will have draft picks in 2015 and 2016 that will displace veterans and there is the unknown element of the value the team places on positions and players.

Accurate assumption.

Decision 1: Meet Revis' demands? This is a case where the player has the leverage because if he does nothing and the team keeps him a 1 year/20 million deal kicks in. So... the player has the leverage and will probably use it.

I don't think Revis has all the leverage. He is still under the team's control and IF Revis is keen on a long-term deal and he WANTS to stay in Foxboro then the Pats have those levers to pull. Keep in mind the Pats are not obligated to do anything. What we don't know if how far Revis will push the Pats. Will he not show up to OTA or camp and risk not being paid $20m or so? Doubtful? With that said if the Pats want any chance of signing other players they need to get his cap # down for 2015 and push some $ to 2016 and beyond.

Decision 2: Sign or tag McCourty. The tag requires 9.5 million in cap space and we are 3.9 million over the cap based on assumptions from Miguel. So we have to clear 13.4 million just to be able to use the franchise tag. We need anywhere from 5 to 9 million to account for the 1st year of a long-term deal.

I think the DMC negotiations are going to be tougher then Revis'. If he wants Byrd, Weddle or Goldson deal then he is gone. If he accepts something around $6.5 AAR then that seems more in-line with his performance. There is no way they franchise him at $9.5m. No way.

Decision 3: What to do with Wilfork and Solder. Do you move 2015 money into 2016 with Wilfork? Do you feel Solder is worth 7.5 million guaranteed?

Wilfork needs to accept less $ of he is gone. Case closed. Not sure about Solder. He had an uneven year so maybe the Pats use this time to do a long term deal b/c his value is down a bit?

I assume a Mayo restructure and a Brady restructure.

Mayo yes. Brady? He just accepted a $1m per year bump and is still very affordable. Not sure why they would want to play with that?

Free agents most at risk of not returning: Vereen (too valuable league wide to get back cheaply) and Gostkowski (does the organization value the position of kicker enough to pay 4-5 million?)

I think Vereen is gonzo. Gost stays for $3.5 AAR. Depends on how much up-front thought IMO.

 

[Miguel]

I don't think Revis has all the leverage. He is still under the team's control and IF Revis is keen on a long-term deal and he WANTS to stay in Foxboro then the Pats have those levers to pull. Keep in mind the Pats are not obligated to do anything. What we don't know if how far Revis will push the Pats. Will he not show up to OTA or camp and risk not being paid $20m or so? Doubtful?

FYI - The Pats do have to do something. They have to pick up the $12 million option. In doing so they have to pay Revis a $12m roster bonus starting on March 10. Once they pick up the option AND it becomes March 10, his minimum cap number for 2018 becomes $17,870,000.
$5 million signing bonus proration
$12 million roster bonus
$870,000 minimum salary for a player with his experience
Add in the signing bonus proration of any extension and any cap savings from an extension becomes less than $7 million.

 

[RobertWeathers]

FYI - The Pats do have to do something. They have to pick up the $12 million option. In doing so they have to pay Revis a $12m roster bonus starting on March 10. Once they pick up the option AND it becomes March 10, his minimum cap number for 2018 becomes $17,870,000.
$5 million signing bonus proration
$12 million roster bonus
$870,000 minimum salary for a player with his experience
Add in the signing bonus proration of any extension and any cap savings from an extension becomes less than $7 million.

Yes. My point is that they do not need to cut him and do not need to renegotiate. They can pay him as is. Certainly it is advantageous of the team to spread the money around and lessen the cap hit and cash outlay forv2015.

 

[mgteich]

Decision 2: Sign or tag McCourty. The tag requires 9.5 million in cap space and we are 3.9 million over the cap based on assumptions from Miguel. So we have to clear 13.4 million just to be able to use the franchise tag. We need anywhere from 5 to 9 million to account for the 1st year of a long-term deal.

Since we are not paying Revis $20M, the resolution of the Revis situation will likely provide enough cap space to sign or even franchise McCourty.