CBA Split % Question

[theogt]

So what exactly does a cash floor mean? Is that a specific type of floor?

A player's salary and bonus can be accounted for in different years under the cap. For example, a player who received a $15 million signing bonus in 2004 received all of that cash in 2005. However, the team would have amortized the $15 million cap hit over the life the contract. If it's a 5 year contract, only $3 million per year would have been counted toward the team's cap number. This can drastically distort a team's cap number as compared to its actual cash payments in any given year. A cash floor requires that teams actually spend 90% of the cap in cash in a given year.

I think this actually gives teams less flexibility in when to pay out cash under their contracts, which could potentially result in less aggregate cash being paid to players. Perhaps a multi-year rolling cash floor would fix that, but it could get too complicated to be worthwhile.

 

[Hostile]

If teams spent at the floor, based on the cap numbers the owners suggested, it would have been a reduction in total player compensation from 2009 and 2010.

Unless I am missing something, that is impossible.

In 2009 the Cap was $128 million per team. 80% of that is $102.4 million.

In theory every team had to be above that floor. I would assume they all were. 2010 was uncapped.

That would mean at a 90% floor the Cap would be $113.8 million.

Bottom line is, the floor actually grants the players more money whereas the Cap does not. The Cap is for the teams, the floor is for the players.

 

[AdamJT13]

The one thing I'll say in defense of the players is that the old CBA, had it not been terminated, would have also included a floor of 90% of the cap in 2011 (based on the 1.2% increase per year, starting with a floor of 84% in 2006).

Thus, from their perspective, they would have been accepting the same floor, and presumably a lower cap, in 2011 than they would have received under the old CBA, had the owners not opted out. It would be hard from their perspective to view that as any sort of concession on the owners' part.

The old CBA included a minimum team salary (salary cap charges), but no minimum for actual money spent. The owners' March proposal included a rolling three-year cash spending minimum of 90 percent of the cap for each team. There's a difference.

 

[Picksix]

A player's salary and bonus can be accounted for in different years under the cap. For example, a player who received a $15 million signing bonus in 2004 received all of that cash in 2005. However, the team would have amortized the $15 million cap hit over the life the contract. If it's a 5 year contract, only $3 million per year would have been counted toward the team's cap number. This can drastically distort a team's cap number as compared to its actual cash payments in any given year. A cash floor requires that teams actually spend 90% of the cap in cash in a given year.

I think this actually gives teams less flexibility in when to pay out cash under their contracts, which could potentially result in less aggregate cash being paid to players. Perhaps a multi-year rolling cash floor would fix that, but it could get too complicated to be worthwhile.

Got it. Thanks.

 

[Hoofbite]

The old CBA included a minimum team salary (salary cap charges), but no minimum for actual money spent. The owners' March proposal included a rolling three-year cash spending minimum of 90 percent of the cap for each team. There's a difference.

So, over the course of any 3 years the spending had to be 90%?

It wasn't an annual minimum?

 

[theogt]

Unless I am missing something, that is impossible.

In 2009 the Cap was $128 million per team. 80% of that is $102.4 million.

In theory every team had to be above that floor. I would assume they all were. 2010 was uncapped.

That would mean at a 90% floor the Cap would be $113.8 million.

Bottom line is, the floor actually grants the players more money whereas the Cap does not. The Cap is for the teams, the floor is for the players.

I was referring to actual cash spent in 2009 and 2010.

 

[theogt]

Got it. Thanks.

By the way, I meant "received all of that cash in 2004."

 

[AdamJT13]

So, over the course of any 3 years the spending had to be 90%?

It wasn't an annual minimum?

The cap minimum was annual. The cash minimum would be a rolling three-year minimum. I'm not sure whether there still would be an annual cap minimum, or if it would even be needed.

 

[Hostile]

I was referring to actual cash spent in 2009 and 2010.

2010 was uncapped. Several teams took advantage. That shouldn't be factored into the thinking.

 

[Outlaw Heroes]

The old CBA included a minimum team salary (salary cap charges), but no minimum for actual money spent. The owners' March proposal included a rolling three-year cash spending minimum of 90 percent of the cap for each team. There's a difference.

Thanks. That's a helpful clarification.

It raises a further question, however: since one would expect cap charges, to the extent that they don't reflect actual cash outlays, to at least reflect cash outlays previously made (for example, a pro rata portion of a previously paid signing bonus), wouldn't one expect cash spending and salary cap charges to even out over time? If so, why should the players prefer a 90% cash floor to a 90% minimum team salary? To the extent that this year's cash spend is less than 90% of the cap and there is a 90% minimum salary, surely that can only be because prior years' cash spend was greater?

 

[AdamJT13]

Thanks. That's a helpful clarification.

It raises a further question, however: since one would expect cap charges, to the extent that they don't reflect actual cash outlays, to at least reflect cash outlays previously made (for example, a pro rata portion of a previously paid signing bonus), wouldn't one expect cash spending and salary cap charges to even out over time? If so, why should the players prefer a 90% cash floor to a 90% minimum team salary? To the extent that this year's cash spend is less than 90% of the cap and there is a 90% minimum salary, surely that can only be because prior years' cash spend was greater?

For one, incentives can be charged against the cap to meet the minimum, and if those incentives are not earned, that money is not paid, and that amount is added to the team's cap the next year. Teams could just continue to underspend the minimum in real dollars while pushing cap room forward.

Also, a cash minimum would make sure that teams spend money on more "current" players instead of just carrying cap charges for money spent more than three years earlier -- possibly even for players no longer on the team.

 

[theogt]

2010 was uncapped. Several teams took advantage. That shouldn't be factored into the thinking.

If I recall correctly, 2010 cash spent was slightly lower than 2009.

 

[Hoofbite]

I was referring to actual cash spent in 2009 and 2010.

If you're referring to the USA today list, the average was less than 109.

 

[Hostile]

If I recall correctly, 2010 cash spent was slightly lower than 2009.

That's what I mean. Teams took advantage. Several teams payrolls were way down below the floor.

 

[SkinsFan28]

there is one other part, I don't recall the exacts but there is also some kind of payment structure when a team doesn't use all the allotted cap that goes back and pays over achieving players. Like a stipend that the league calculates based on playing time, contract and total amount of the salary cap not spent. Maybe someone else knows what these credits are called

 

[Outlaw Heroes]

For one, incentives can be charged against the cap to meet the minimum, and if those incentives are not earned, that money is not paid, and that amount is added to the team's cap the next year. Teams could just continue to underspend the minimum in real dollars while pushing cap room forward.

That makes sense. Thanks.

Also, a cash minimum would make sure that teams spend money on more "current" players instead of just carrying cap charges for money spent more than three years earlier -- possibly even for players no longer on the team.

I think the players should, at best, be indifferent here. In fact, if anything, given the time value of money their economic incentive is to have the cash paid out to players earlier rather than currently.

 

[SkinsFan28]

Just looked at wikipedia's list of yearly salary cap numbers. Just amazed that in 1994 the cap amount they have listed is 34 million dollars. In 15 years it went to 123 million dollars, or nearly 90million dollars more. That is astounding.

 

[theogt]

I think the players should, at best, be indifferent here. In fact, if anything, given the time value of money their economic incentive is to have the cash paid out to players earlier rather than currently.

In any given year, a player may be the beneficiary of delayed spending, so it shouldn't make any difference to a player whether money goes to "current" or "future" players. Reducing a teams' flexibility may inhibit spending in the aggregate.

 

[theogt]

If you're referring to the USA today list, the average was less than 109.

I wasn't.

 

[Hoofbite]

I wasn't.

What are you referring to?