SaintFanInATLHELL

OK. So let's do NFL Capology 101.

NFL Salaries are divided into three components:

1. Signing Bonus (Guaranteed)
2. Annual Salary (not Guaranteed)
3. Other (depends on the contract). This includes option money, workout bonuses, incentives and the like.

#2 always counts against the cap the year that it is paid. If the player is no longer on the team when this money comes up, it does not count against the cap.

#1 is paid when the contract is signed. Short of breech of contract, the player gets to keep the money no matter what. Since this often is a large percentage of the contract, if it had to count against the cap the year it was paid, then the cap would be destroyed quickly. So League rules allows for that bonus to count against the cap in installments over the life of the contract.

#3 may or not me guaranteed. Typically guaranteed dollars are divided like the signing bonus while non guaranteed dollars count against the cap the year they are paid.

Now there are a couple of exceptions. First is #3 guaranteed dollars. They become guaranteed when they are paid. However if the player is released before those option dollars are paid, the team isn't responsible for those dollars against the cap.

The second item is that the guaranteed signing bonus from #1 payments against the cap are accelerated if the player is released before the end of the contract. Instead of paying out the money over the term of the original contract, the money counts against the cap for only 2 years: the current year and the next one.

Note that the league year starts in the first week in March after the SuperBowl. So any players who are still on the roster at the start of the league year will count.

If you read the rules above you will find that it is possible for a player who is released to still count for a significant amount of money against the cap for up to two years. This money is called Dead Money. It cannot be spent on another player, yet the player it counts against is no longer on your squad.

Both the player and the team are incentivized by signing bonuses. The player gets the guaranteed money now. The team gets to spread out the cost of that money over the length of the contract.

The team is incentivized for #2 since it's not guaranteed and it doesn't count against the cap until the league year it is paid. So contracts often will have huge salaries on the back end of the contract. It's money that both the team and player know will likely never be paid in the stated form as it'll kill the team's caps in those years. So before then, the player is released if they are no longer productive, or restructures their contract to a new signing bonus and a much lower salary moving forward.

Now #3 is a chess match. The player wants options to become guaranteed early and often. The team however wants to push back options so they can see if the player is productive enough to be worth the investment of guaranteed dollars.

So for example let's take a player with an 6 year $48 million contract with a $18 million signing bonus, a $6 million option payment in year 4, and salaries of $1, $3, $3, $3, $6, and $8 million salary in years 1-6.

First off the realistic value of the contract is about $23-32 million. The $18 million and the first three years of salary will be paid. If the player is still productive after the first three years, then the $6 option payment and $3 salary will be added in year 4. It is likely that the last $14 million in the last two years will never be paid as structured.

So what's the cap hit? Well $18/6 = $3 million per year. If the option bonus is paid in year 4, then it is divided among the remaining 3 years. So $6/3 = $2 million for the last three years of the contract. These are added to the salaries. So the cap hit would be $4, $6, $6, $8, $11, $13 million for the 6 years.

So now let's get to the dead money. The first decision point is after year 3. It's a no brainer if the player is living up to the contract. Pay the $6 million and keep it moving. But if the player needs to be replaced then the contract is terminated before year 4. So the last 3 years of salary ($17 million) and the $6 million option are not paid. The player walks away with the $18 million bonus and the $5 million in salary. However, the team is on the hook for the remaining $9 million of signing bonus that has not yet been charged to the cap. And they have 2 years to get it done. So the player costs $4.5 million per year in cap for years 4 and 5. Since the contract is terminated, the player is no longer on the team and has to be replaced. But for the next two years the cap is $4.5 million lower than everyone elses. Now note it's less than the $6 and $8 million that would have counted if the player had been retained.

It gets a bit worse if the player were terminated after year 4. Since the $6 million option has been paid the player walks away after 4 years with $32 million. There is still $6 million left of the signing bonus, and another $4 million from the option payment. So the team will have $5 million a year to pay for the missing player in years 5 and 6.

If the player is still productive after year 4, then the team will probably come to the player and try to renegotiate. But the player has some leverage because the team will have to eat $5 million and not have a player if they simply terminate the contract.

So this year Harper, Smith, and Vilma were all in these year 4 and 5 situations. So getting rid of them could have put upwards of $20 million of dead money for the next two years.

So as the old saying goes... "sometimes it's cheaper to keep 'em"

SFIAH

Super Bowl Championships: New Orleans Saints:1, Carolina:0, Atlanta Chokers: STILL ZERO

Only Atlanta choked in an unchokable situation... Life is definitely good.