granitestatebillsbackers Posted January 11, 2006 Posted January 11, 2006 Ok, here goes. Are you sitting down? After 40 years of watching pro ball (the Bills, of course) and immersing myself in every conceivable facet of the game, it's time to scale Everest. That's right: the Salary Cap. I need someone to reply with Salary Cap 101. Just the basics--tell me what the hell the cap is, how players count against the cap, etc. etc. etc. You know, all the crap that they talk about on Sirius NFL radio while I sit there and nod thoughtfully so the guy in the next car thinks that I am part the NFL "brain trust." It would be greatly appreciated--and they'll be able to inscribe the following on my gravestone: Here lies Mike. He was full of crap. But the dude could talk Salary Cap. Oh yeah. Thank you.
JimBob2232 Posted January 11, 2006 Posted January 11, 2006 Well... Obviously yearly salary counts against that years cap. If a player signed a 10 year contract worth 60 million dollars (including a 10 mil bonus), assuming a linear salary distribution (unlikely) his cap would look like this: Year 1: 1mil bonus (10mil/10years) + 5 mil (salary) = 6 mil total cap hit. This continues on until the contrat terminates. Now if a player is cut after year 7, the bonus remaining is escalated. So the remaining 3 mil on his signing bonus is all due in the year he is cut. (there are ways to reduce this and spread it over 2 years, but you wanted the basics). Also, after Week 1, all salaries for the year are guarenteed. (unless you pull a TO...but I wont go there) Thats it in a nutshell. You now know more than 90% of football fans... But You can dig much deeper and learn about incentive pay. Essentially there is likely to be earned bonuses (such as McGahee starting 8 games) and Unlikely to be earned bonuses (Such as Losman throwing for 4000 yards). LTBE incentives count against the cap, unlikely to be earned bonuses dont initially. Also, the reason contract restructurings are typically bad for cap management is because it converts some current salary into a signing bonus, thus increasing the cap number in future years for short term gain. For instance, take player A, he has a 3 year deal worth 36 mil with a 6 mil signing bonus, and again a linear distribution of salary. Year 1 Cap Hit (2 mil bonus + 10 mil salary = 12 mil cap hit) Now after year 1, the team restructures his salary for cap relief in year 2. They do so by taking the 10 mil he is due in salary for year 2, and convert 8 mil of that into a bonus. Year 2 Cap Hit (2 mil bonus + 4 mil bonus (8 mil in new bonus/2 years left on the contract) + 2 mil salary (10 mil original salary-8 mil due to the restucturing). Total Cap hit, 8 mil, a savings of 4 million for the team. BUT...in year 3 watch what happens Year 3 Cap hit (2 mil bonus +4 mil bonus +10 mil salary) = 16 mil total cap hit and the reason Ty Law is no longer on the Patriots. Also note this was assuming a linear salary distribution, a typical NFL contract pays small salaries in year one (due to the large bonus recieved), and escalates as the years go by, thus causing the above affect to be even more pronounced. This is a simple scenario, obviously, the effect can be lessened by getting a player to take a pay cut or increase the length of the contract offer to spread out the new bonus over more years. That said, there are a ZILLION cap rules. There is a reason teams hire respected professionals to do nothing but deal with the cap. You cant expect to nail down excat numbers. Even Clumping Platelets usually cant get it within a couple percent, and he is by far the best I have seen at breaking down the cap numbers. There is also alot of information that we do not know that affects the cap. So I hope that was simple enough to understand. Good luck learning the cap..and when you do, come back and share!
granitestatebillsbackers Posted January 11, 2006 Author Posted January 11, 2006 Well... Obviously yearly salary counts against that years cap. If a player signed a 10 year contract worth 60 million dollars (including a 10 mil bonus), assuming a linear salary distribution (unlikely) his cap would look like this: Year 1: 1mil bonus (10mil/10years) + 5 mil (salary) = 6 mil total cap hit. This continues on until the contrat terminates. Now if a player is cut after year 7, the bonus remaining is escalated. So the remaining 3 mil on his signing bonus is all due in the year he is cut. (there are ways to reduce this and spread it over 2 years, but you wanted the basics). Also, after Week 1, all salaries for the year are guarenteed. (unless you pull a TO...but I wont go there) Thats it in a nutshell. You now know more than 90% of football fans... But You can dig much deeper and learn about incentive pay. Essentially there is likely to be earned bonuses (such as McGahee starting 8 games) and Unlikely to be earned bonuses (Such as Losman throwing for 4000 yards). LTBE incentives count against the cap, unlikely to be earned bonuses dont initially. Also, the reason contract restructurings are typically bad for cap management is because it converts some current salary into a signing bonus, thus increasing the cap number in future years for short term gain. For instance, take player A, he has a 3 year deal worth 36 mil with a 6 mil signing bonus, and again a linear distribution of salary. Year 1 Cap Hit (2 mil bonus + 10 mil salary = 12 mil cap hit) Now after year 1, the team restructures his salary for cap relief in year 2. They do so by taking the 10 mil he is due in salary for year 2, and convert 8 mil of that into a bonus. Year 2 Cap Hit (2 mil bonus + 4 mil bonus (8 mil in new bonus/2 years left on the contract) + 2 mil salary (10 mil original salary-8 mil due to the restucturing). Total Cap hit, 8 mil, a savings of 4 million for the team. BUT...in year 3 watch what happens Year 3 Cap hit (2 mil bonus +4 mil bonus +10 mil salary) = 16 mil total cap hit and the reason Ty Law is no longer on the Patriots. Also note this was assuming a linear salary distribution, a typical NFL contract pays small salaries in year one (due to the large bonus recieved), and escalates as the years go by, thus causing the above affect to be even more pronounced. This is a simple scenario, obviously, the effect can be lessened by getting a player to take a pay cut or increase the length of the contract offer to spread out the new bonus over more years. That said, there are a ZILLION cap rules. There is a reason teams hire respected professionals to do nothing but deal with the cap. You cant expect to nail down excat numbers. Even Clumping Platelets usually cant get it within a couple percent, and he is by far the best I have seen at breaking down the cap numbers. There is also alot of information that we do not know that affects the cap. So I hope that was simple enough to understand. Good luck learning the cap..and when you do, come back and share! 561399[/snapback] That is a damned good start. Thanks for taking the time to explain that. I may have to read it a couple dozen times for it to sink in--especially the restructuring. I feel smarter already.
SHOUTBOX MONSTER! Posted January 11, 2006 Posted January 11, 2006 Ok, here goes. Are you sitting down? After 40 years of watching pro ball (the Bills, of course) and immersing myself in every conceivable facet of the game, it's time to scale Everest. That's right: the Salary Cap. I need someone to reply with Salary Cap 101. Just the basics--tell me what the hell the cap is, how players count against the cap, etc. etc. etc. You know, all the crap that they talk about on Sirius NFL radio while I sit there and nod thoughtfully so the guy in the next car thinks that I am part the NFL "brain trust." It would be greatly appreciated--and they'll be able to inscribe the following on my gravestone: Here lies Mike. He was full of crap. But the dude could talk Salary Cap. Oh yeah. Thank you. 561381[/snapback] Marv?
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