Salary Cap Analysis

[Schneed10]

Originally Posted by #56fanatic

Another salary cap discussion, man this is dangerous territory. Everyone keeps going down the restructure road, thats fine for a year or two, but you still have to pay the original signing bonuses too. I know the skins have done a great job of circumventing this cap for a while, I just dont see how they are going to be able to keep doing things this way. They are eventually going to either have to start cutting really good players or bite the cap figures.They are just putting it off by restructuring, plus they keep having roster turnover because they have to cut 10 to 15 people every year. I found this about restructing deals.



If a player decides to renegotiate his contract, how does the bonus money he received in the original contract count against the cap? Answer:If a player renegotiates his contract and gets a new signing bonus, the new signing bonus is prorated over the remaining years of the original contract AND over the extension. The allocation of the original signing bonus remains unchanged.

For example, Player X is currently in the third year of a four-year deal (2000–2003) that paid him a $1 million signing bonus. In 2002, Player X renegotiates his deal extending his contract to the 2005 season while getting a $2 million signing bonus. The original $1 million signing bonus is allocated at $250,000 per year over 2002 and 2003 just as it would be if there were no renegotiations. However, the new $2 million signing bonus is allocated at $500,000 per year over the remaining two years of the original contract (2002–2003) and the extended two years (2004–2005).

You're right about how bonuses are allocating. It's just a matter of how much a team can afford to kick down the road. There's often a little more wiggle room than there appears to be, because the cap limit goes up every year. Last year the limit was $85 million. This year it will be $93 million. The next year it will be near $100 million. The key is not to kick too much of the bonus down the road.

For example, Portis originally signed for a bonus of $11.6 million over 8 years. This year, he's due a $3 million roster bonus. If you renegotiate that into a signing bonus, here's the bonus allocation:

2004: $1.45 million
2005: $1.45 million
2006: $1.45 million + $0.5 million = $1.95 million total
2007: $1.45 million + $0.5 million = $1.95 million total
2008: $1.45 million + $0.5 million = $1.95 million total
2009: $1.45 million + $0.5 million = $1.95 million total
2010: $1.45 million + $0.5 million = $1.95 million total
2011: $1.45 million + $0.5 million = $1.95 million total

That's adding half a million per year, very manageable. In 2007, he's due another roster bonus in the amount of $1 million. Renegotiating that would add another $0.2 million to each year from 2007 onwards. It's not an extraordinary amount.

You can keep a core group of players together in this manner. We can go through the next five years (assuming the CBA gets resigned) and not have to ditch any of our core 15-20 guys. The problem with running your cap in this manner is that if you try to add a high-priced free agent to the mix, you're talking about having the cap blow up in your face.

[CrazyCanuck]

Originally Posted by Schneed10

You're right about how bonuses are allocating. It's just a matter of how much a team can afford to kick down the road. There's often a little more wiggle room than there appears to be, because the cap limit goes up every year. Last year the limit was $85 million. This year it will be $93 million. The next year it will be near $100 million. The key is not to kick too much of the bonus down the road.

Agreed.

Originally Posted by Schneed10

For example, Portis originally signed for a bonus of $11.6 million over 8 years. This year, he's due a $3 million roster bonus. If you renegotiate that into a signing bonus, here's the bonus allocation:

2004: $1.45 million
2005: $1.45 million
2006: $1.45 million + $0.5 million = $1.95 million total
2007: $1.45 million + $0.5 million = $1.95 million total
2008: $1.45 million + $0.5 million = $1.95 million total
2009: $1.45 million + $0.5 million = $1.95 million total
2010: $1.45 million + $0.5 million = $1.95 million total
2011: $1.45 million + $0.5 million = $1.95 million total

That's adding half a million per year, very manageable. In 2007, he's due another roster bonus in the amount of $1 million. Renegotiating that would add another $0.2 million to each year from 2007 onwards. It's not an extraordinary amount.

With the current CBA you can only prorate 4 years out for 2006. It used to be a max of 7 years, but has been declining every year as the CBA approaches expiry.

So Portis' $3M bonus would be spread out over the next 4 years at a hit of $750K per year. If a new CBA is signed, I'd assume the max proration would go back to 7 years.

[70Chip]

A few thoughts on the Sportsline article about the cap.

First, it seems to me to be shoddy reportage to rely on other teams' cap people to comment, without giving the Redskins a chance to reply. As usual, these sources are anonymous. Que Cosell's rant about the de plor a bull state of sports jour na lism.

Second, if there is no new CBA, my understanding is that a number of teams will have to make radical cutbacks in 2006-not just the Skins. After 2006 it's Katey bar the door (as Ken Beatrice used to say) and we can spend as much as we like.

Third, if there is a new CBA and I realize the clock is ticking, the overall revenue pool will go up because of the demand from smaller teams to include more revenue streams. In addition, the players share of that overall pie will be higher because this is Upshaw's central demand and he cannot face his members without some victory on this front. Therefore isn't it likely that a renewed CBA means that the cap will spike way up and save the Redskins from the article's hellish scenario? Would this increase the 2006 cap or would the affect/effect be delayed?

I would like to hear from our resident experts, Schneed and Canuck. Their projections are a little more crowd pleasing. Am I right in my basic asessment? No CBA = bad news for us and all other teams over the cap in 2006 and, Renewed CBA = much higher caps bail us out. I know we've been over this but the article makes it seem that we are screwed regardless and I don't see it that way.

[Schneed10]

Originally Posted by 70Chip

Third, if there is a new CBA and I realize the clock is ticking, the overall revenue pool will go up because of the demand from smaller teams to include more revenue streams. In addition, the players share of that overall pie will be higher because this is Upshaw's central demand and he cannot face his members without some victory on this front. Therefore isn't it likely that a renewed CBA means that the cap will spike way up and save the Redskins from the article's hellish scenario? Would this increase the 2006 cap or would the affect/effect be delayed?

I would like to hear from our resident experts, Schneed and Canuck. Their projections are a little more crowd pleasing. Am I right in my basic asessment? No CBA = bad news for us and all other teams over the cap in 2006 and, Renewed CBA = much higher caps bail us out. I know we've been over this but the article makes it seem that we are screwed regardless and I don't see it that way.

I think you're onto something there. Crazy Canuck can help me out and correct me if I'm off base, but here's how I understand things. Upshaw is asking that the revenues be distributed based on Total Football Revenues, which includes all NFL revenues, from TV deals and local revenues. The owners have agreed to that at this point, agreeing that the entire pie of NFL revenues should be eligible for revenue sharing. What they can't agree on is what percentage of that pie should go to the players. Players are asking for 65%, owners are proposing 59%.

In 2006, this is what the current situation looks like:
Players get 64.5% of DGR (Designated Gross Revenues). Included in DGR is TV Revenue, ticket sales etc., but not local revenues like stadium naming revenues. This amounts to $93 million in salary cap space for each team.

But now, owners at this point have agreed to share more than just DGR, they've agreed to share Total Football Revenues (TFR), which amounted to $5.8 billion in 2005. If the two sides settle on a percentage somewhere between the 59% and 65% impasse, here will be the salary cap limits:

65% of TFR: (65% x $5.8 billion) / 32 Teams = $117.8
64% of TFR: (64% x $5.8 billion) / 32 Teams = $116.0
63% of TFR: (63% x $5.8 billion) / 32 Teams = $114.2
62% of TFR: (62% x $5.8 billion) / 32 Teams = $112.4
61% of TFR: (61% x $5.8 billion) / 32 Teams = $110.5
60% of TFR: (60% x $5.8 billion) / 32 Teams = $108.7
59% of TFR: (59% x $5.8 billion) / 32 Teams = $107.0

Now, what I don't know is whether or not those numbers would go into effect for 2006, or if they'd go into effect for 2007. If they don't go into effect until 2007, then the $5.8 billion used in the calculation would be a higher number (because the NFL's total revenue grows each year). That would mean the cap limits would be even higher than what's projected here.

[Schneed10]

Originally Posted by CrazyCanuck

Agreed.

With the current CBA you can only prorate 4 years out for 2006. It used to be a max of 7 years, but has been declining every year as the CBA approaches expiry.

So Portis' $3M bonus would be spread out over the next 4 years at a hit of $750K per year. If a new CBA is signed, I'd assume the max proration would go back to 7 years.

True that. I forgot about that. I tend to live in the land of milk and honey, where the beer flows like beer, there are no hephalumps or woozles, and the CBA never has a chance of expiring. It may be a bit utopian and the danger of the CBA expiring is surely real and tangible at this point, but I really don't think either side wants to let it expire. I think they'll get it done at the last minute, even if it takes postponing the March 3 start of free agency.