A Salary Cap Question / Thought

[Hoofbite]

Just a quick thought and perhaps something to consider with the salary cap. I've long stated I don't think the annual restructuring is a great way to operate. There have been many discussions on whether or not it is smart but here's an aspect that none of the discussions have seemed to take into consideration, largely because it wasn't a part of the previous CBA.

The team cash spending minimum that is now a part of the CBA.

For each of the following four-League Year periods, 2013–2016 and 2017–2020, there shall be a guaranteed Minimum Team Cash Spending of 89% of the Salary Caps for such periods (e.g., if the Salary Caps for the 2013–16 and 2017–2020 are $100, 120, 130, and 150 million, respectively, each Club shall have a Minimum Team Cash Spending for that period of $445 million (89% of $500 million))

Basically, over the span of 2013 to 2016 teams will have to spend a total of 89% of the cumulative salary cap in actual cash.

As everyone knows the salary cap has base salaries and bonus money. Some bonuses are actual cash payments for a specific year like performance bonuses, roster bonuses, and what not. Some bonuses are just prorated amounts of money that were paid up to years prior to the date for which it is accounted.

That said, a team's cap number doesn't exactly reflect "cash spending" for any given year. A team could have a cap figure of $120M but $20M of that comes in the form of prorated signing bonuses of contracts that were signed in years prior.

Just a simple equation for example, X + Y = Salary Cap Figure

With a fixed cap number, increasing the the prorated money (Y or X, doesn't matter) will decrease the amount available to pay out as actual salaries. If you have more prorated money on the books, you just can't spend as much.

So here are a couple of questions.

1. Any chance prorated money actually counts as cash spending for the year it is assigned?

I would think not and doesn't necessarily make sense if it does because no money was actually paid in 2015 for a signing bonus that was received in 2013. I could be wrong.​

2. By moving base salary money that would have been paid anyway into prorated money that may or may not actually count as "cash spending" for a single year, can a team create a situation in which they are unable to meet the 89% cash spending mandate in the CBA?

Take for instance the 2014 Dallas Cowboys. They currently have $25.9M assigned to the cap in the form of signings bonuses that have already been paid. They also have $16.6M in "other bonuses" (from Spotrac) which is basically all the base salaries that they have converted into guaranteed money paid out at the time of conversion. Lastly, they have $11.7M in dead money which we know is not money that a team will have spent in the year in which it assigned.

Grand total of $54.2M, which out of a projected cap of maybe $125M is equal to 43.3%
​

By itself that's not necessarily a problem because we're talking about a 4 year average. You can be under for any year so long as you cover your shortfall in the other years. But, as you can probably assume just based on how the team has operated, Dallas has lots of prorated money in general as a consequence of restructuring contracts every year.

For 2013 they have $30.7M in signing bonuses on the cap, $18.1M in "other bonuses" (read as "restructured money), and they have $15.2M in dead money. That's a total of $64M in cap charges. In terms of actual cash payments it looks like Dallas has paid about $54.5M out. Add in the $25M for Romo's bonus and $10M for Lee's bonus and they're just under $90M for this season....which isn't even 3/4ths of the total cap.

I don't know for sure if Spotrac's numbers are 100% accurate. I have seen some mistakes. Actually emailed the guy about one of them and he corrected it. But assuming that prorated money does not count for the year that it is assigned but rather the year it was paid, it's hard to imagine that Dallas will be able to meet the league floor in terms of cashing spending.

I'm not sure. I don't have all the information as to what counts and what doesn't so who knows for sure. I've always viewed the restructuring as sort of a "ground-up" erosion of your roster. If you increase the "fake money" that is on the cap, the effect is a decreased amount of "real money" which is basically how you stock your team with depth. You aren't giving large signing bonuses to depth but rather higher salaries than vet minimums, sometimes decent base salaries. With a set amount of actual money to pay in salaries, that's just the way it goes. The guys with signing bonuses are going to get their base salaries and they are generally well above minimum. So you cover yourself by stocking your team with lower-wage players in order to get under the cap. End result is a bunch of lesser talent guys, no depth on the team, and a prayer that all the players at the top of your payroll don't miss any time.

If prorated money doesn't count for the year it is assigned, Dallas may have a bigger problem in that they cannot get cap compliant in terms of the cash floor. Additionally, there aren't many options to help this problem. Converting base salaries doesn't increase your cash spending when compared to the player receiving weekly paychecks. Only way I can think of off the top of my head would be to free as much space as possible in order to hand out large signing bonuses to free agents and that's worse than just converting money to get compliant.


Just a thought. We'll see how it plays out but could be something that pops up down the road. I know the cap threads are likely played out but I hadn't see any discussion on the cash floor aspect so I figured I'd throw it out there.

 

[CaptainCreed]

Just a quick thought and perhaps something to consider with the salary cap. I've long stated I don't think the annual restructuring is a great way to operate. There have been many discussions on whether or not it is smart but here's an aspect that none of the discussions have seemed to take into consideration, largely because it wasn't a part of the previous CBA.

The team cash spending minimum that is now a part of the CBA.



Basically, over the span of 2013 to 2016 teams will have to spend a total of 89% of the cumulative salary cap in actual cash.

As everyone knows the salary cap has base salaries and bonus money. Some bonuses are actual cash payments for a specific year like performance bonuses, roster bonuses, and what not. Some bonuses are just prorated amounts of money that were paid up to years prior to the date for which it is accounted.

That said, a team's cap number doesn't exactly reflect "cash spending" for any given year. A team could have a cap figure of $120M but $20M of that comes in the form of prorated signing bonuses of contracts that were signed in years prior.

Just a simple equation for example, X + Y = Salary Cap Figure

With a fixed cap number, increasing the the prorated money (Y or X, doesn't matter) will decrease the amount available to pay out as actual salaries. If you have more prorated money on the books, you just can't spend as much.

So here are a couple of questions.

1. Any chance prorated money actually counts as cash spending for the year it is assigned?

I would think not and doesn't necessarily make sense if it does because no money was actually paid in 2015 for a signing bonus that was received in 2013. I could be wrong.​

2. By moving base salary money that would have been paid anyway into prorated money that may or may not actually count as "cash spending" for a single year, can a team create a situation in which they are unable to meet the 89% cash spending mandate in the CBA?

Take for instance the 2014 Dallas Cowboys. They currently have $25.9M assigned to the cap in the form of signings bonuses that have already been paid. They also have $16.6M in "other bonuses" (from Spotrac) which is basically all the base salaries that they have converted into guaranteed money paid out at the time of conversion. Lastly, they have $11.7M in dead money which we know is not money that a team will have spent in the year in which it assigned.

Grand total of $54.2M, which out of a projected cap of maybe $125M is equal to 43.3%
​

By itself that's not necessarily a problem because we're talking about a 4 year average. You can be under for any year so long as you cover your shortfall in the other years. But, as you can probably assume just based on how the team has operated, Dallas has lots of prorated money in general as a consequence of restructuring contracts every year.

For 2013 they have $30.7M in signing bonuses on the cap, $18.1M in "other bonuses" (read as "restructured money), and they have $15.2M in dead money. That's a total of $64M in cap charges. In terms of actual cash payments it looks like Dallas has paid about $54.5M out. Add in the $25M for Romo's bonus and $10M for Lee's bonus and they're just under $90M for this season....which isn't even 3/4ths of the total cap.

I don't know for sure if Spotrac's numbers are 100% accurate. I have seen some mistakes. Actually emailed the guy about one of them and he corrected it. But assuming that prorated money does not count for the year that it is assigned but rather the year it was paid, it's hard to imagine that Dallas will be able to meet the league floor in terms of cashing spending.

I'm not sure. I don't have all the information as to what counts and what doesn't so who knows for sure. I've always viewed the restructuring as sort of a "ground-up" erosion of your roster. If you increase the "fake money" that is on the cap, the effect is a decreased amount of "real money" which is basically how you stock your team with depth. You aren't giving large signing bonuses to depth but rather higher salaries than vet minimums, sometimes decent base salaries. With a set amount of actual money to pay in salaries, that's just the way it goes. The guys with signing bonuses are going to get their base salaries and they are generally well above minimum. So you cover yourself by stocking your team with lower-wage players in order to get under the cap. End result is a bunch of lesser talent guys, no depth on the team, and a prayer that all the players at the top of your payroll don't miss any time.

If prorated money doesn't count for the year it is assigned, Dallas may have a bigger problem in that they cannot get cap compliant in terms of the cash floor. Additionally, there aren't many options to help this problem. Converting base salaries doesn't increase your cash spending when compared to the player receiving weekly paychecks. Only way I can think of off the top of my head would be to free as much space as possible in order to hand out large signing bonuses to free agents and that's worse than just converting money to get compliant.


Just a thought. We'll see how it plays out but could be something that pops up down the road. I know the cap threads are likely played out but I hadn't see any discussion on the cash floor aspect so I figured I'd throw it out there.

Found this on: http://www.askthecommish.com/SalaryCap/faq.aspx

I don't know much about the new CBA and cap discussions in general or the information provided is really legitimate.

Question posed:

"That's cheating! How can you have a real salary cap if all you have to do is give a player a signing bonus to get around it?
Answer: Now we come to the tricky part. The signing bonus IS part of the player's salary. So it counts against the cap. When determining team and player salary, the signing bonus will be prorated over the length of the contract.

For example, if a player signs a four-year deal with a $1 million signing bonus, $250,000 of that bonus will count toward team salary for each contract year ($1 million divided evenly over the four-year contract is $250,000 per year). If a team releases a player, the unamoratized bonus money (the remaining prorated bonus money) counts immediately against the cap.

In our example above, if the player is released after Year 1, the remaining $750,000 (the prorated signing bonus money for years 2-4) counts against the cap in Year 2 -- even though the player is no longer on the team's roster.

The proration of the signing bonus cannot extend beyond two years after the close of the existing CBA.

An expression that was thrown about repeatedly during the various labor meetings is "cash over cap". Well, these signing bonuses are what insiders were talking about, when they brought up that term. One of the things that held up negotiations amongst the owners with the last CBA extension (both back in 2006 and in 2011) was the move to place some kind of cap on the amount of signing bonus money that could be pushed into future years for cap accounting purposes. Although there was no cap on signing bonuses, there was a limit put in place that signing bonuses could only be prorated for up to five (5) years. With the latest CBA, that five-year figure remains unchanged."

I am not sure that answers your question but it does seem like the prorated signing bonuses will count for the cap. I believe otherwise a large majority of the league would be in trouble like Dallas if that wasn't the case.

 

[Hoofbite]

Well I think it counts for the year in which it was signed so you could hand out $40M in bonus money one year and wouldn't have to come close to the 89% minimum the next.

 

[xwalker]

Just a quick thought and perhaps something to consider with the salary cap. I've long stated I don't think the annual restructuring is a great way to operate. There have been many discussions on whether or not it is smart but here's an aspect that none of the discussions have seemed to take into consideration, largely because it wasn't a part of the previous CBA.

The team cash spending minimum that is now a part of the CBA.

I think the cap floor is calculated by the same method as the cap ceiling. If a 10M bonus is spread out over 5 years, then it counts 2M per year in both the floor and ceiling calculations.

 

[dogberry]

What's the rule on rewriting contracts to move money to future years? The process we will use on Romo, Ware, Carr... to free up money in 2014?

 

[JBond]

Interesting post hoof. maybe some the cap gurus will chime in.

 

[xwalker]

What's the rule on rewriting contracts to move money to future years? The process we will use on Romo, Ware, Carr... to free up money in 2014?

Your question is unclear.

They restructure contracts by giving the player a restructure bonus and subtracting that bonus from his originally scheduled base salary. If the player has a 6M base salary, they can give him a 5M restructure bonus and a 1M base salary. The base salary cannot be lower than the league minimum. The minimums are determined by the number of years of service that the player has accrued.

 

[Longboysfan]

A good reverse question is look at teams spending under the CAP on a regular basis.
They will have to play catch up somewhere.

 

[TTexasTT]

respect for you guys who truely grasp the whole salary rules and situations. Its beyond me, the more I try to understand it, the less it makes sense. Perhaps this is why I dont work for NASA.

 

[Hoofbite]

I think the cap floor is calculated by the same method as the cap ceiling. If a 10M bonus is spread out over 5 years, then it counts 2M per year in both the floor and ceiling calculations.

I found a piece from Florio from a while back.

Remember, it’s not cap space but cash spent. So when a team like the Panthers gives defensive end Charles Johnson a $30 million signing bonus on a six-year deal, only $5 million counts against the cap — but $30 million counts against the league’s total spending requirement of $3.8 billion.

http://profootballtalk.nbcsports.com/2011/07/30/per-team-spending-minimum-doesnt-apply-until-2013/

Here's an article out of Tampa.

That’s technically true, but it’s actually more complex. For one, the 89 percent figure is “cash” spending, as opposed to “cap” spending. Under the current $123 million cap, that means the Bucs must pay players at least $109.47 million in real money, not cap dollars (cap spending includes technical aspects like proration, while cash spending is simply the total amount of cash the player was paid).

http://www.tampabay.com/blogs/bucs/clearing-up-the-nfls-minimum-spending-requirements/2111504

From what I am seeing, the "cash minimum" only counts base salaries and bonuses provided they are actually paid for that particular year. The prorated bonus amount in year 2 of a 5 year contract doesn't appear to increase the cash spent at all. Additionally, I do believe there was an actual "cap floor" in years past but the reason this stipulation was a win for the players is because it actually forces money to spent in a give year, not just accounted for.

I think this aspect changes things a bit in terms of how contracts are structured. There isn't as much benefit to big signing bonuses because it deducts from the total cap number but doesn't deduct from the cash spent.

 

[Hoofbite]

A good reverse question is look at teams spending under the CAP on a regular basis.
They will have to play catch up somewhere.

That's far less of a problem though because free agency gives you every opportunity to spend as much as necessary. There's really no way to reduce your prorated amount.

 

[xwalker]

I found a piece from Florio from a while back.



http://profootballtalk.nbcsports.com/2011/07/30/per-team-spending-minimum-doesnt-apply-until-2013/

Here's an article out of Tampa.



http://www.tampabay.com/blogs/bucs/clearing-up-the-nfls-minimum-spending-requirements/2111504

From what I am seeing, the "cash minimum" only counts base salaries and bonuses provided they are actually paid for that particular year. The prorated bonus amount in year 2 of a 5 year contract doesn't appear to increase the cash spent at all. Additionally, I do believe there was an actual "cap floor" in years past but the reason this stipulation was a win for the players is because it actually forces money to spent in a give year, not just accounted for.

I think this aspect changes things a bit in terms of how contracts are structured. There isn't as much benefit to big signing bonuses because it deducts from the total cap number but doesn't deduct from the cash spent.

Good research!

The cash paid out to Brandon Carr in the 1st year of his contract (including the signing bonus) was less than the cash paid out in year 2. That should have helped spread out the cash portion of the contract over more years as opposed to one huge signing bonus. The big 2nd year salary that is converted to a restructure bonus at the beginning of year 2 also keeps the year 1 cap hit lower than the bigger signing bonus option.

 

[Beast_from_East]

So are we trouble as some indicate or can we restructure and be ok?

Props to you guys that got this figured out

 

[cowboys1981]

I fell asleep trying to read how all that works. I think I found my cure for insomnia lol

 

[junk]

It is over a 4 year average though. Not 89% spend per year, but an 89% average over a 4 year window.

I still think Hoof has a valid question though

 

[Longboysfan]

That's far less of a problem though because free agency gives you every opportunity to spend as much as necessary. There's really no way to reduce your prorated amount.

But if your continually under CAP - then it's a problem to get someone to come there as players know who spends and who does not - to go along with their record.