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Salary Cap Plain Talk

this is a discussion within the Saints Community Forum; just a good rundown that is easier to understand than most i have read: The salary cap is the absolute maximum each club may spend on player salaries in a capped year. For 2005, that amounts to 65.5 percent of ...

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Old 03-09-2005, 02:44 PM   #1
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Salary Cap Plain Talk

just a good rundown that is easier to understand than most i have read:

The salary cap is the absolute maximum each club may spend on player salaries in a capped year. For 2005, that amounts to 65.5 percent of league-wide "Defined Gross Revenues" (divided by 32 teams from 2004) made up of pre-season, regular season, and post-season gate receipts and radio and television rights. (In 2003, the percentage was 64.25%, and in 2004 it rose slightly to 64.75% of said revenues.) The salary cap remains in effect at all times, although certain exceptions make it appear as though it's not being applied at times.

A team may not exceed this cap with the salaries of players that are under contract and on their roster. If a team does exceed the salary cap at any time, the NFL can waive players from the team, starting with those earning the lowest salaries, until the team's payroll has fallen under the cap. In addition, the NFL may fine a team up to $1 million per day for exceeding the cap.

Teams must spend at least $67.3 million under the cap rules.

Only players under contract count toward the salary cap. Free agents do not count toward the cap until they sign a contract with the team.

Often it may appear that the cap is not in effect. How, for example, can teams have up to 80 players on the roster (in training camp) yet not exceed the cap? Here's the explanation.

From February 24 to the day before the season begins, a club's top 51 salaried players count towards the cap, plus pro-rated signing bonuses, incentives, etc., but not base salaries of other players on the roster up to 80. Thereafter, not all salaries on a club's roster count toward the cap. The maximum salary cap for 2005 is now expected to be about $85.5 million per club.

To get around the cap, teams typically structure their player contracts in such a way that much of the money is designated as "signing" or "roster" bonuses, or "incentive clauses." A signing bonus or roster bonus does count toward the cap but is prorated over the length of the contract, even though the entire bonus has been paid in cash "up front" to the player. When you read about a player and team agreeing to restructure a contract, it virtually always means that the player has agreed to convert at least a good part of his coming season's base salary into a signing bonus.

Incentive clauses are often made easy to reach as an indirect means of playing a player more while keeping his "base salary" low. Too easy to reach, however, and they're likely to be considered salary by the NFL, which must approve all contracts. (Incentives adjudged likely to be earned are counted against the cap.) For instance, if Drew Bledsoe, who's big and known for being immobile, had an incentive clause paying him $1 million for each game he started, the NFL would almost certainly rule that such payments are salary rather than genuine incentives, since Bledsoe has been a starter for many years. But a clause paying Bledsoe a bonus if he rushes for 500 yards would be legitimate, since he's known for his lack of mobility.

There are many additional rules, some of them highly technical. An example is the so-called "Deion Sanders rule" that was enacted after Dallas owner Jerry Jones gave Sanders a (then-)astronomical $13 million signing bonus, combined with base salaries of the then-minimum salary of $178,000 for the first three years. The new rule states that the first three years of any player's salary must equal the prorated amount of the signing bonus. The intent is to restrict circumvention of the salary cap.

Here's another little-known technicality. Those "likely to be earned" incentives mentioned above? Well, when they're not reached, they become cap credits the following year, which can mean a hidden bonanza for an underachieving franchise. A team that plays poorly, and which writes incentives into many of its player contracts, may actually reap a reward the year after. Case in point: the 2004 Vikings, who are an astounding $33 million under the cap. In actuality, the Vikings' cap is almost $95 million, because Minnesota gets more than $14 million in cap credits this year for "likely to be earned" incentives that weren't earned by their players in 2003.
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Old 03-09-2005, 02:48 PM   #2
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Salary Cap Plain Talk

Now THAT was a good read. Nicely done Kelley.
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