Long, but A GOOD ONE!!!!!!!!!!!!!!!!!!!!! ____________________________________) Team's Cap May Come to a Head Many Skeptical That Redskins Can Spend Now Without Paying Later By Jason La Canfora and Nunyo Demasio Washington Post Staff Writers Sunday, July 18, 2004 After another offseason of lavish spending on free agents, the Washington Redskins have assembled the highest-paid team in NFL history, leading officials with several NFL teams to predict that Coach Joe Gibbs has a two-year window to win a fourth Super Bowl before facing a salary cap crisis that would force him to jettison many of his best players. Officials around the NFL are watching the developments in Washington with interest, several of them said, as Redskins owner Daniel Snyder pushes the boundaries of the salary cap, the annual limit on the amount each team can spend on salaries and bonuses, by deferring payments until the out-years of players' contracts. The Redskins' payroll in 2004 will exceed $110 million, breaking the previous record of $102 million set by the Denver Broncos in 2001, according to the NFL Players Association, but through prorated bonuses and other accounting devices Washington still will manage to come in under this year's $80.6 million salary cap. The average NFL payroll last season was $71.77 million. Redskins officials refute the notion that they are mortgaging the team's future and say they are positioned to avoid running up against cap problems at least through 2007. "Every move we make is done looking three years down the road," said Vinny Cerrato, Washington's vice president of football operations. "When we sign a free agent we know exactly how it's going to affect us and how it will count against the salary cap, and we're not going to do something that will put us in salary-cap jail or salary-cap hell." Yet, several officials from other NFL clubs who have looked at Washington's salary structure said they believe the bills on the Redskins' offseason spending will come due sooner than the Washington front office predicts. "To me what they're saying is they are banking on really winning in the next two years," said an executive who manages the salary cap for one NFL club, who spoke on the condition of anonymity. "They just aren't going to be able to keep all those guys, they really aren't. There's nothing wrong with building for a run to the Super Bowl, but you're only kidding yourself to say you're not going to suffer the consequences of overextending in the free agent market. It's mathematically impossible." Whether the Redskins' strategy pays off remains to be seen. But with the team preparing to open training camp on July 31, an examination of its salary structure provides a window into how the NFL salary cap system works and how Snyder has sought to push its limits. The salary cap was created in 1993 -- the year after Gibbs first retired -- as part of an agreement between NFL owners and the players' association. The concept was simple: Players gained the right to become free agents in exchange for allowing the league to limit the amount each team could spend on salaries each year. The cap is credited as a major reason for the NFL's competitive balance and financial success, and other professional sports leagues hold it up as a model for limiting salary escalation and promoting competition. While the idea behind the cap was relatively straightforward, its execution has become exceedingly complex as teams experiment with ways to manipulate it. In recent years, for example, the league has been forced to add specific restrictions on teams providing perks such as free trips or transportation to circumvent the limit. The salary cap has spawned a new breed of NFL executive, the cap expert, a position that requires the cunning of a lawyer, the wiles of an accountant and the football instincts of a general manager. Careful management of the cap has become a prerequisite for success on the field. As teams have learned to massage the cap, they have found more creative ways to assemble highly paid talent and still stay within its limits. It has become routine for clubs to give star players healthy signing bonuses that, for bookkeeping purposes, are prorated annually for several years, while paying them minimal base salaries. The prorated bonuses and small base salaries work to lessen, or delay, the full impact on the cap. This season, all 32 NFL teams must be under an $80.6 million salary cap, but in reality teams are able to spend well beyond that -- this is referred to as spending cash over the cap -- given the way signing bonuses are computed. The problem is that deferred payments cannot be pushed down the road forever. They ultimately come due. And, according to a variety of NFL experts, no team owner has been more proactive in trying to structure cap-friendly contracts that delay the eventual financial consequences than Snyder since he bought the Redskins five years ago. "It doesn't surprise me at all [the way the Redskins have operated], and it's all worth it if you have a winning team," said Jerry Jones, who has won three Super Bowls as owner of the Dallas Cowboys. "I'm not criticizing the Redskins at all for spending. I've done it both ways: I've spent a lot of money and not won anything at all, and I've spent a lot of money and really gone for it and won it all. Page 2 of 4 Team's Cap May Come to a Head "I've watched with interest what the Redskins have done for the last four or five offseasons, especially because of our great rivalry and all that comes with it, but I also keep a close eye on what all of the teams in the league are doing in terms of the salary cap and how they make decisions with regard to the [economic] system we have in place. And there are mixed reviews around the league about how strong to go in spending over the cap." Juggling Numbers During the first three days of the NFL free agency period in March, the Redskins doled out $50 million in signing bonuses to six players -- quarterback Mark Brunell, running back Clinton Portis, defensive lineman Phillip Daniels, defensive tackle Cornelius Griffin, cornerback Shawn Springs and linebacker Marcus Washington. The Redskins also signed linebacker LaVar Arrington to an eight-year, $68 million contract extension in December. The deal led to an arbitration dispute between Arrington and the club, with Arrington claiming the team has reneged on paying him a $6.5 million bonus. In all, the Redskins signed more than 30 free agents since last season ended, awarding them more than $70 million in bonus payments, according to team officials. And Washington still must sign safety Sean Taylor, its No. 1 draft pick, and two other selections. Just how the Redskins can have a payroll well in excess of $110 million yet still fit under an $80.6 million salary cap illustrates how the cap system works, and how it ultimately could come back to haunt the team. "There are always guys that are here and gone because of cap reasons," said offensive lineman Jon Jansen, the Redskins' longest-serving player. "But we're in the business of trying to win now. I'm sure down the road we'll have to make some difficult decisions and hopefully -- I don't know that much about it -- but hopefully they do, and they've got it figured out." By design, the Redskins negotiated low base salaries in virtually all of its offseason contracts and rewarded the free agents with significant signing bonuses to minimize the salary cap impact, at least for the first few years. Signing bonuses are lump-sum payments made when the contract is signed, or in the early years of the contract. For salary cap purposes, however, they are often spread over the duration of the deal. Signing bonuses for players signed in 2004 can be prorated for a maximum of six years. Contracts in the NFL are not guaranteed, and a player can be cut before any season, allowing teams to alleviate his salary cap hit; this explains why the market often is filled with quality free agents each offseason. However, even if a player is released, his original signing bonus is counted against the team's cap each year until the original contract expires. The Redskins, among other teams, have added another wrinkle. To further minimize the cap impact, the Redskins often compensate free agents with bonuses scheduled to be paid in later years of their contracts in addition to the standard signing bonus. Washington structured an additional bonus, called a roster bonus, into all of its larger contracts this offseason, with the bulk of most of those bonuses slated to be paid in 2006. A roster bonus counts against the salary cap in its entirety for the season in which it is issued. The abundance of roster bonuses for the 2006 season is the primary reason why league officials who have looked over the Redskins' contracts predict salary cap trouble for Washington that year. This season, Portis, Brunell, Springs, Washington, Daniels and Griffin will combine for $13.17 million against the salary cap limit. That figure rises by a mere $10,000 in 2005. But in 2006, a steep increase begins due to roster bonuses. Arrington, Springs, Portis, Griffin, Washington and wide receiver Laveranues Coles, who was inked to a seven-year, $35 million deal a year ago, each has roster bonuses ranging between $2 million and $6.5 million due in 2006. These roster bonuses would appear to be a major hurdle to staying under the salary cap, but the Redskins also worked language into the contracts that gives the team the option to convert the roster bonuses into a signing bonus when they come due. As a signing bonus, that money could then be prorated over the remainder of the contract, thus further deferring the impact on the salary cap, according to numerous sources who have seen the contracts. This technique was first used by San Diego in 2000 when it re-signed linebacker Junior Seau, according to NFL sources, and was included in quarterback Payton Manning's new seven-year, $99 million contract with Indianapolis. But the Redskins have used this technique with much greater regularly than other teams, according to several executives with other NFL teams. Redskins officials maintain that the club began to implement this contract structure two years ago after considerable study of the salary cap and applied it more broadly this offseason after Gibbs came out of retirement in January. The Redskins' front office remains confident its contract maneuvers will ensure at least a three-year run with the current roster and allow for more free agent spending in future years if need be. "By the time we get to 2006 it will be clear that we knew what we were doing in 2004," Cerrato said. Page 3 of 4 Team's Cap May Come to a Head Snyder declined repeated requests to be interviewed for this story. Several officials with other NFL clubs said they were skeptical Washington can pull it off. "Our [personnel] guys say it's a two-year plan in Washington," said a high-ranking official of one NFL team who, like others, requested anonymity so as not to impede future dealings with the Redskins. "It could be they will cut some good veterans before then  to try to stretch it out -- I don't know what they will do with a guy like [offensive lineman Chris] Samuels, for instance -- but ultimately you have to pay. You can't restructure forever." Samuels is entering the fifth year of a seven-year, $47 million deal. "You have to recognize that if you are spending heavily in one year, it will be spread over for years from now, and you will have less money to spend in the future -- period. That is our system," said Jones, who had to raze an aging dynasty in Dallas after he could no longer fit all of his stars under the cap. "There is no amount of creativity or ingenuity that will allow you to overcome that fundamental reality. I've lived through it." Can't Have it All In 1997, Jones and the Cowboys had a day of reckoning. The Cowboys had won three Super Bowls in four years and, with quarterback Troy Aikman, running back Emmitt Smith, wide receiver Michael Irvin and cornerback Deion Sanders, had the most star-studded lineup in the league. But years of eye-popping spending to keep these players took a toll, and Jones found his options under the salary cap becoming more limited. The Cowboys' nucleus was declining, but Jones was still heavily invested in them. One season, a third of his salary cap was already tied up by old contracts of players who had been released by the team, he said, and no amount of finagling could change that fact. "It's just like in everyday life," Jones said. "You can't always buy the most expensive thing all the time and still have enough money left over to spend on all the other things that you really need to get by. In our system you can't have it all." The Cowboys, who had a winning season last year with virtually a no-name lineup led by new coach Bill Parcells, are not the only NFL club demonstrating a newfound sense of caution about overspending. According to Joe Banner, Philadelphia's team president and salary cap guru, the league recently conducted a computer study to determine if there was any relationship between aggressive salary cap spending and winning. "There was only one thing that really directly correlated with any consistency," Banner said, "and that was the teams with the smallest amount of miscellaneous charges made the playoffs and advanced in the playoffs, way more than the teams that had the larger miscellaneous charges." In 2000, the Baltimore Ravens won their first Super Bowl and were loaded with veterans and facing cap problems. But they decided to sign free agent quarterback Elvis Grbac and push for back-to-back titles; instead, they lost early in the 2001 playoffs, had to release nearly all of their starters and entered the 2002 season with the youngest roster in NFL history. "We did whatever we had to do with restructuring contracts to be able to make one more run," Ravens General Manager Ozzie Newsome said, "but we knew full well that we were going to have to blow things up after the 2001 season. If we would have tried to stretch it out for another year, all that would have done is taken us another few years longer to get back to becoming competitive again." New York Giants General Manager Ernie Accorsi put it this way: "You can mortgage the future for the short term, but sooner or later you're going to have to pay for whatever you do. " Page 4 of 4 Team's Cap May Come to a Head Dead Money Early in his tenure as Redskins owner, Snyder signed many veterans like Sanders, Jeff George and Mark Carrier whose best playing days were behind them. Many were not around long -- Sanders lasted one season -- but their large signing bonuses still counted against Washington's salary cap for years, eating up valuable room. NFL people refer to this as "dead money" or "miscellaneous charges," and the Redskins faced as much as $27 million in such figures in one of Snyder's first seasons; last year the Redskins led the league with $14.5 million in dead money, according to league sources. Snyder has altered his tactics in recent years. In the past two offseasons Washington has sought players in their mid-20s -- largely restricted free agents who require the Redskins to send their former teams a draft pick. Brunell, who turns 34 in September, is the lone exception. The 11-year veteran signed a seven-year, $43.36 million contract in February, including an $8.6 million signing bonus. The contract is prorated over six years, and will cost the club $1.43 million against the cap each year. Redskins management projects a median age for the team of around 27 for the upcoming season; the league average in 2003 was 26.5. "We've learned from our mistakes," one Washington team official said. "Look at the age of the players we sign now. There's the difference." The Redskins generally have been able to steer clear of cap-induced salary purges under Snyder, although they have parted with pricey veterans with some regularity. Linebacker Jeremiah Trotter was cut in June to avert a more serious cap hit, and finances played an integral role in the decision to trade cornerback Champ Bailey to Denver for Portis. Quarterback Brad Johnson, tailback Stephen Davis and fullback Larry Centers have shined elsewhere after being salary cap casualties in Washington. But those cuts have not deterred Snyder's spending this year. Snyder, who works on the salary cap daily and handles major contract negotiations, retains the final say on spending. Gibbs, who is also the team president, said he took a "crash course" on the salary cap upon returning to the Redskins and knew he needed a sense of present day NFL economics after 11 years away from the game. His glory days in Washington came at a time when clubs could stockpile talent at all positions and retain players for virtually their entire career. Now, teams overhaul key players with regularity, and finances play a part in virtually every move an NFL club makes. "I understand the basics of" the cap, Gibbs said. "I think I understand how to get more cap room, and I kind of see, 'Hey, we sign this guy now, and it impacts you down the road.' But like I've said, most of our stuff is a three-year plan, and I think I understand the general workings of it."