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News: DMN | Salary Cap 101: Explaining the NFL's financial system

Discussion in 'News Zone' started by Bluefin, Jul 18, 2004.

  1. Bluefin

    Bluefin Well-Known Member

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    Salary Cap 101: Explaining the NFL's financial system

    [IMG]
    John F. Rhodes / DMN
    Club vice-president Stephen Jones (left) is the Cowboys' salary cap expert.

    10:47 PM CDT on Saturday, July 17, 2004

    By TODD ARCHER / The Dallas Morning News


    The salary cap rules the NFL.

    Sometimes, teams use it as a crutch for not doing much in terms of free agency. Other teams push the limits of the cap, taking a win-at-all-cost approach without thinking about the future.

    The Cowboys are in the middle. If they think there is a player worth having, they will get him. They vow not to get caught in salary-cap jail the way they were after their Super Bowl run.

    "I don't see any mentality around here from Jerry [Jones] or Bill [Parcells] of, 'Let's load up now for next year and hope it works out,'" director of player personnel Stephen Jones said. "There are too many variables."

    Stephen Jones is the Cowboys' salary-cap expert, but even he concedes that sometimes it's difficult to know what works and what doesn't.

    Here's a primer on the cap.

    How the NFL comes up with the cap: The salary cap is a percentage of the NFL's defined gross revenues (DGR), which include all revenues from TV and radio and ticket sales, and portions from concessions, parking, advertising and promotion, signage, sponsorship agreements, stadium clubs, luxury boxes, programs and novelties, NFL Films and NFL properties.

    2004: Roughly 64 percent of the NFL's defined gross revenues (DGR) or $80.582 million.

    How to compute a player's "cap figure": The salary-cap figure is the combination of the player's base salary and the yearly slice, or proration, of his signing bonus.

    A (Signing bonus/contract years) + B (season's base salary) = Cap figure.

    Player A signs a five-year deal with an $8 million signing bonus. His first-year base salary is $750,000.

    A ($8 million/5) + B ($750,000) or $1.6 million + $750,000 = $2.35 million.

    What happens when a team releases a player? The only money that gets counted against the salary cap is the remaining proration of the signing bonus.

    Player A signs a five-year deal with an $8 million signing bonus. He is cut in the second year of his contract. The team would be charged $6.4 million ($8 million - $1.6 million) against the cap for a player no longer on the roster.

    Why do teams wait until June 1 to cut players? Teams generally wait until June 1 to release players who have high salary-cap figures. For players cut after that date, NFL rules allow clubs to spread the hit over two years.

    Player A signs a five-year deal with an $8 million signing bonus. He is cut in the second year of the deal on June 1. The team is charged $1.6 million (signing bonus proration) that season and $4.8 million (the remaining signing bonus) next season.

    How does a team restructure a contract? There are two primary ways, with a pay cut being simpler.

    If the Cowboys had not been able to trade WR Joey Galloway, they would have tried a pay cut. Reworked contracts have incentives that allow the player to make back some lost money. Teams can also turn base salary into a signing bonus, then prorate that bonus over the rest of the contract. It lowers a player’s cap figure for a year but adds money down the road.

    What's the most important part of a contract? The signing bonus, because it generally is the only guaranteed money. Agents like to look at what the player will receive in total money over the first three years, because most contracts are backloaded to make the average per year look better.

    Player B signs a seven-year, $42 million deal with an $8 million signing bonus. He is cut in the fourth year of the contract. Player B probably ends up being paid around $12 million over three years.

    What are incentives and escalators in contracts? An incentive is easy to understand. A defensive end, say, would earn $500,000 (charged to the next year's cap) if he recorded 10 sacks during the season. With an escalator, the player would not only receive the $500,000, but his salary would increase by that amount for the remainder of the contract.

    How many contracts count against the cap? Even though teams are allowed to carry 53 players and eight practice-squad players during the season, only the top 51 contracts count against the cap. All guaranteed money also counts against the cap. If a player who was given a $100,000 signing bonus is cut, then that money counts.

    What is a split contract? This protects a team in case of an injury. Let's say a rookie signs a contract with a base salary of $230,000, but he suffers an injury during training camp that will end his season. Instead of paying the full $230,000, the player would receive $135,000, saving the team $95,000.

    INSIDE MARCELLUS WILEY'S FREE-AGENT CONTRACT

    One of the Cowboys' bigger needs during the off-season was finding a pass rusher to play alongside Greg Ellis and La'Roi Glover.

    Their initial target was Bert Berry, who ended up in Arizona with a five-year, $25 million contract that included a $5 million signing bonus. The Cowboys believed that was too high a price to pay for a player who started a full season only once.

    After ending their dalliance with Berry, the Cowboys turned their attention to Marcellus Wiley once he was cut by San Diego. They were able to sign Wiley to a four-year, $16 million contract that included a $4.5 million signing bonus.

    Only a year older than Berry, Wiley came in $9 million cheaper and has a better resume (2001 Pro Bowl, 41 career sacks).

    Details of the contract: Four years, $16 million ($4.5 million signing bonus)

    • 2004: $4.5 million bonus, $660,000 base salary ($1.78 million cap figure)

    • 2005: $500,000 roster bonus, $2 million base salary ($3.62 million cap figure)

    • 2006: $4.34 million base salary ($5.46 million cap figure)

    • 2007: $4 million base salary ($5.12 million cap figure)

    Wiley can void the final year of the contract if he makes the Pro Bowl or gets 11 sacks in any of the first three seasons. It's a gamble worth taking for the Cowboys because in 2007, Wiley will be 33.

    TOP CAP FIGURES (IN MILLIONS)

    2004: Larry Allen ($5.5), La’Roi Glover ($4.7), Dexter Coakley ($3.96), Darren Woodson ($3.55), Keyshawn Johnson ($3.0)

    2005: Larry Allen ($6.55), Flozell Adams ($5.9), La’Roi Glover ($5.2), Dexter Coakley ($4.71), Darren Woodson ($4.3)

    2006: Larry Allen ($7.55), Flozell Adams ($7.5), La’Roi Glover ($7.2), Darren Woodson ($6.8), Dexter Coakley ($5.46)

    FUTURE FREE AGENTS

    2005

    Unrestricted: Willie Blade, Leonardo Carson, Aveion Cason, Javiar Collins, Tony Dixon, DeMingo Graham, Matt Lehr, Lynn Scott, Markus Steele, Vinny Testaverde, Dedric Ward, James Whalen.

    Restricted (3+ year veterans): Darian Barnes, Jamal Brooks, Billy Cundiff, Andrew Davison, Pete Hunter, Chad Hutchinson, Cedric James, Daleroy Stewart, Kurt Vollers, Tyson Walter.

    Exclusive rights (2 years or less): Jermaine Brooks, Ryan Flinn, Mat McBriar, Keith O’Neil, Tony Romo, Dave Volk.

    2006

    Unrestricted: Richie Anderson, Antonio Bryant, Quincy Carter, Gennaro DiNapoli, Andre Gurode, Donald Mitchell, Eric Ogbogu, Jeff Robinson, Randal Williams.

    Restricted: Keith Davis, Jemeel Powell, Scott Shanle, Zuriel Smith, Torrin Tucker, Ryan Wingrove.

    Exclusive rights: ReShard Lee.

    2007

    Unrestricted: Dexter Coakley, Kenyon Coleman, La’Roi Glover, Al Johnson, Al Singleton, Darren Woodson.

    Restricted: Shaun Smith.

    2008

    Unrestricted: Flozell Adams, Larry Allen, Terry Glenn, Bradie James, Keyshawn Johnson, Dat Nguyen, *Marcellus Wiley, Jason Witten.

    2009

    Unrestricted: *Jamar Martin, Tango McCauley, *Roy Williams.

    2010

    Unrestricted: Greg Ellis, Terence Newman.

    2012

    Unrestricted: *QB Drew Henson.

    *Contract length can be shortened based on playing time

    ROOKIE POOL

    Using a formula based on the number of picks a team has and where those picks are slotted in the seven-round draft, each team is given a figure. The Cowboys have $2,895,414 to spend on their eight draft picks and undrafted free agents. A rookie’s signing bonus is prorated and is added to the base salary to produce the rookie’s pool figure.
  2. Yeagermeister

    Yeagermeister Active Member

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    Isn't that Adam in the picture with Parcells ;)
  3. JBell523

    JBell523 That's my Quarterback

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    No it's Stephen Jones next to a hippo
  4. LaTunaNostra

    LaTunaNostra He Made the Difference

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    Looking at those free agent lists is heartening. For now, there is no dreadful year coming up when so many quality starters have to be re-signed that it will break the piggy bank. And some will be retiring by the time their contracts come due.

    I suppose the lists can be interpreted as 'there'll be no stressful cap years in the near future because there's so little talent", but that timeline and the accompanying pay offs look like a healthy scenario to me.

    So far.
  5. MichaelWinicki

    MichaelWinicki "You want some?" Staff Member

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    The smart money says Larry Allen, Darren Woodson and Dexter Coakley won't be seeing that coin in 2005.
  6. Bluefin

    Bluefin Well-Known Member

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    It's nice getting an idea of what players will be nearing the ends of their contracts and the overall status of the Cowboys cap.

    Here's something else to consider.

    LA may get dealt before the '05 season if his play improves and he still wants a change of location, he may get cut if his play doesn't improve.

    Coakley shouldn't be a starter in '05, so i don't see the club welcoming him back with that cap number.

    Coke will either restructure his contract to stay with a contender or face his release and the prospects of making a minimum salary elsewhere.

    Woody may retire after this season (unlikely) or the '05 season if things work out and he can leave at the top.

    I expect Woodson would have to restructure his deal in he was still with the team in '06, unless he was still a starter.

    Three of the club's top five salaries may depart in the coming years or be greatly reduced.

    There would be a bonus escaltion in the event of release or retirement, but it wouldn't be more than the base salary of the player at that point.

    Basically, Dallas will be free to do whatever it wants to enhance the roster in coming years.

    I don't think Parcells and Jones will abandon their strategy for a "win now" mentality, but they will be able to purchase any big ticket item they feel fits with the team and will be helpful in their quest for another title.
  7. LaTunaNostra

    LaTunaNostra He Made the Difference

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    Morning Mike.

    I will get overjoyed if LA can earn half the 5.5 he's making this year.

    I hope that LA giveaway, the munificent grateful bounty kind that Tuna too was once prone to, was the last Jerry Jones ever ever EVER indulges in.

    No backsliding, Jerry, grass can grow over the new path you set out upon real fast.

    Ironic, tho Mike, how much fun it is to save someone else's money. :p
  8. LaTunaNostra

    LaTunaNostra He Made the Difference

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    Somewhere down the line the QB is going to have to get paid. Either Quincy or Drew or Tony or whoever, but the guy(s) who sticks around under Tuna will have to be successful to do so, and will have to get paid accordingly. There's no Payton Manning here, with his cap hogging numbers, but no team can expect to get away with what the Cowboys have QB wise, for very long. Not a winning team anyway. On the other hand, low QB pay has helped carry the situation while JJ and Son have been working their way out of the Galloway/Allen fiascos.
  9. junk

    junk I've got moxie

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    Good points, but more importantly, a QB has to emerge before he can get paid. At this point, there isn't anybody worth paying anymore than what they are making now.

    QC unless he improves dramatically, shouldn't even going to fetch $1 million per year.

    How long is Drew under contract for?

    Vinny will be long gone. Romo has to make the team first (something I am still not convinced he is going to do).

    Bottom line, I am not worried about paying the big bucks to a QB until some serious improvement shows up. If QC looks like he can develop this year, it might be time to look at an extension. Otherwise, let him play out his contract and test the waters.

    2008 looks like the scary year with Witten, Nguyen, Flozell and Bradie all coming up.
  10. MichaelWinicki

    MichaelWinicki "You want some?" Staff Member

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    Barb funny you should mention that.

    I always found I'm much better handling other's:

    finances
    kids
    martial problems
    and personality quirks

    rather than my own. An amazing skill really. :)
  11. LaTunaNostra

    LaTunaNostra He Made the Difference

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    Well, the way I worded it was the guy who sticks around is going to have to be successful,and therefore will have to get paid. That guy might not be anyone who is even currently on the roster, for all I know. But eventually, he who emerges will merit the pay.

    If 2008 Dallas looks worrisome, imagine 2004 Washington.

    I read a piece on the Skins a few years back when they were feeling the effects of Snyder's first splurge. The article said Snyder and Cerrato felt that keeping dead money down to no more than nine percent was within the feasble range.

    9% dead money is too rich for my blood.
  12. MichaelWinicki

    MichaelWinicki "You want some?" Staff Member

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    BTW I seen your name mentioned on that other board...


    You were lovingly referred to as "LaTunaHostile". :D
  13. LaTunaNostra

    LaTunaNostra He Made the Difference

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    Ain't it the truth, Mike? :p

    Ironic I spend money like the proverbial drunken sailor but am so considerate of Jerry's mammoth wallet.

    I keep reading about Tuna cautioning JJ not to splurge. That stint in NY sure taught Bill some lessons!
  14. junk

    junk I've got moxie

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    Agreed on the QB. Might even end up being a draft pick although I sure hope one of these guys pans out.

    You know the cap is pretty good when you are somewhat worried about 2008. :D
  15. LaTunaNostra

    LaTunaNostra He Made the Difference

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    LOL

    What other board, you trouble maker you? :p

    I bet it can't beat the chat room "discussions" .

    But I ain't the gal who watches the players fall into the huddle and plaintively asks "why are they taking about me"?

    Let 'em talk, c'est la vie, baby.
  16. LaTunaNostra

    LaTunaNostra He Made the Difference

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    Well, I should have mentioned you need NEVER worry about the cap.

    The Skinz fans will tell you this cap nonsense is all a hoax and that "cash trumps cap".

    All you need is your own mint and you're set forever. :D
  17. MichaelWinicki

    MichaelWinicki "You want some?" Staff Member

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    It was the board inhabited by our ex-mates.

    As a matter of fact your good friend SBK posted something where he referred to you. I wish you two would quit spending so much time together. :D


    Chat room discussions? About you Barb? No way. Unless of course Hos and I are there and then maybe just a little.

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